Moneycontrol
Feb 16, 2011 05:07 PM IST | Source: Reuters

Most companies in China to hike wages in '11: Survey

About three quarters of companies operating in China expect to increase wages by over 5% in 2011, a survey by British recruitment group Hays showed on Wednesday.

Most companies in China to hike wages in '11: Survey

About three quarters of companies operating in China expect to increase wages by over 5% in 2011, a survey by British recruitment group Hays showed on Wednesday.


The finding comes amid a boom in China's middle class, a result of the country's economic success, and highlights the high inflationary pressures in the pipeline as well as rising costs faced by many companies.


Chinese employees "are now in a stronger position than they were previously. They have a much better understanding of their worth in the market place and are aware of their bargaining power," said Nigel Heap, managing director of Hays Asia Pacific.


The annual salary survey of more than 5,000 employers based in Shanghai and Beijing showed more than half expect to increase salaries between 6-10% over the next 12 months while a third intend to hike them by more than 10%.


Wage inflation is being propelled by fast economic growth in smaller or so-called tier-two cities, which has given hundreds of millions of migrant workers the option to return home where the cost of living is cheaper, Heap said.


Labour demand has risen significantly in tier-two cities following massive investments by the government in the past two years to develop inland areas, he said.


Rising wages put pressure on inflation although that is being compensated for by even faster gains in productivity for now. Data showed on Tuesday core inflation, stripped of volatile food prices, jumped to its highest in at least a decade in January.


Still, the Chinese government is encouraging wage hikes as it wants to boost consumer spending and reduce the economy's reliance on exports.


In January, the city of Beijing raised the minimum wage by 21% while Shanghai's mayor has said he plans to raise it by more than 10% this year given the fast pace of development and soaring food prices.


Guangdong province, the mainland's manufacturing hub, will reportedly raise its minimum wage by an average 18.6% from March.


Multinationals operating in China such as Yum Brands Inc have already seen commodity-induced cost inflation eat into their profit margins.

The owner of the KFC, Pizza Hut and Taco Bell fast-food chains forecast this month rising 2011 labour and food costs in China and said that modestly raising prices in its top growth market would help mitigate that pressure.

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