China ups minimum wages, as inflation persists

SHANGHAI – Many Chinese cities are raising minimum wages for workers, fanning inflationary pressures while also seeking to soothe frustrations over price hikes.

The double-digit increases in major manufacturing centers like Guangdong, and the cities of Shanghai, Tianjin and Beijing follow wage hikes last year that have further raised labor costs, accelerating a shift by makers of inexpensive goods to lower cost places like Vietnam and Indonesia.

Shortages of workers in some areas and strikes and other protests by disgruntled young workers have also prompted authorities to push minimum wages higher, with most localities expected to follow suit.

A report released last week by the American Chamber of Commerce in Shanghai said that 85 of the companies responding believed that rising costs are hurting China’s competitiveness compared with other developing countries.

China retains massive advantages such as the standard of its infrastructure and its own huge market, which increasingly is the focus of foreign companies manufacturing there. But surging costs for labor, land, energy and materials have prompted many making low-cost items such as toys, shoes and clothing to move some production to other parts of the developing world.

Tianjin’s labor bureau, in a statement seen Wednesday on its website, said it is preparing to raise the city’s minimum monthly wage to 1,070 yuan ($160) from the current 920 yuan ($140).

Shanghai’s mayor, Han Zheng, confirmed last week that the city was preparing for an April 1 increase in the city’s minimum wage, by more than 10 percent over the current monthly 1,120 yuan ($170).

Han described this as an effective way to ensure a “rational income distribution.”

“It is our responsibility to raise wages in Shanghai because people living on those wages are having a really hard time,” he told reporters during an annual news conference. “It is important for every worker to share the fruits of progress and harmonious labor relations are conducive to healthy businesses,” he said.

Beijing has announced its minimum wage will rise by 20.8 percent this year. Jiangsu, an affluent region adjacent to Shanghai, is hiking its minimum monthly pay by 15 percent and Guangdong, by about 19 percent in March to 1,300 yuan (about $200) _ the country’s highest.

Mindful of past links between surging inflation and political unrest, the authorities have sought to reassure consumers that they have prices under control.

China’s inflation rate was at 4.6 percent in December, down from a 28-month high of 5.1 percent the month before but well above the government’s target of 3 percent. Annual inflation in 2010 was 3.3 percent, and many economists are warning that price hikes may persist in coming months, especially if recent bad weather keeps food prices above normal.

Asked if rising costs might discourage companies from investing in places like Shanghai, Han said he believed companies focus more on the local investment environment and their own business strategies than on labor costs.

“If the companies cannot afford such increases it means their business model is not suitable for the development pattern in Shanghai,” he said. –ELAINE KURTENBACH,AP Business Writer