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China wages seen jumping in 2014 amid shift to services

BEIJING -- China’s wages are set to increase by 10 per cent or more in 2014, driving more low-cost manufacturers out of the country and boosting consumption, the Bloomberg news agency reported, citing analysts at firms including Bank of America.

BEIJING -- China’s wages are set to increase by 10 per cent or more in 2014, driving more low-cost manufacturers out of the country and boosting consumption, the Bloomberg news agency reported, citing analysts at firms including Bank of America.

Mr Lu Ting, a Hong Kong-based economist for Bank of America, said that he sees wage growth of 11 per cent this year after an estimated 10.7 per cent gain in 2013. JPMorgan Chase and Mizuho Securities Asia analysts said that they predict 10 per cent to 15 per cent increases.

China’s ruling Communist Party is pushing for pay increases to retain public support and to accelerate the nation’s shift away from polluting and capital-intensive manufacturing to a more services-driven economy. In minimum-wage increases so far announced for 2014, workers in Shenzhen in Guangdong province get a 13 per cent boost and the gain for those in Yangzhou, Jiangsu province, is 15.6 per cent.

“The trend of shifting low-end manufacturing bases to Southeast Asian countries will only accelerate,” said Mr Shen Jianguang, chief Asia economist at Mizuho in Hong Kong, who formerly worked at the European Central Bank and International Monetary Fund. Mr Shen sees a strengthening currency and tougher controls on pollution also contributing to factories exiting for nations such as Bangladesh, Vietnam and Cambodia.

Demographic shifts will also limit the labour force in coming years as the population ages.

As of May 1 last year, the highest monthly minimum wage was in Shanghai, at 1,620 yuan, and the lowest was in Anhui province at 1,010 yuan, according to data from China Labour Bulletin, a Hong Kong-based worker-rights organisation.

Other places reporting minimum-wage increases for 2014 include the city of Xi’an in Shaanxi province, whose 11.3 per cent gain compares with 15 per cent in 2013. Changsha in Hunan province increased its minimum wage by 9.1 per cent as of Dec 1, down from a prior 10.5 per cent jump.

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