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China’s southern economic powerhouse Shenzhen said Thursday it would raise the minimum wage by 20 percent, following a similar move by Shanghai, as China continues to battle rising inflation and a labor shortage.
The hike, effective from April 1, would bring the minimum monthly wage in the city to 1,320 yuan ($200) from the current 1,100 yuan, the highest minimum wage in the country, Shenzhen’s Human Resources and Social Security Bureau reported.
It is Shenzhen’s largest one-time wage hike over the past 19 years, official statistics show.
A human resources official who declined to be named said the wage hike aims to make jobs in Shenzhen more attractive to solve the current labor shortage facing cities on China’s manufacturing belt on the country’s southeastern coast.
Minimum wages have been rising around the country since last year in the wake of labor shortages and surging inflation.
The consumer price index (CPI), a major gauge of China’s inflation, rose 4.9 percent in January from a year earlier as food prices increased 10.3 percent due to rising demand and a drought in key grain-growing regions.
Analysts say the pay hike will also help the government slow the widening of income gap between the country’s rich and poor and prevent disturbances caused by the rising public resentment over the disparity in wealth.
Premier Wen Jiabao said during an on-line chat with the public that the government would raise salaries of low-income groups and minimum living allowances to ensure fair income distribution.
Shanghai announced Wednesday that it would raise the minimum wage by 14 percent to 1,280 yuan from the current 1,120 yuan.
Many provinces have recently raised their minimum wage levels. Changchun, capital of Northeast China’s Jilin province, is raising the minimum wage from 650 yuan/month to 820 yuan/month; while Guangzhou, capital of South China’s Guangdong province, is raising the minimum wage by 18.2 percent to 1,300 yuan/month.
Wu Haifeng, head of the A-shares research department at Noruma, said pay rises are believed to increase the cost of production and squeeze companies’ profits, but these negative impacts can be offset by many factors, most importantly, increased labor productivity
Wu said in his column on the country’s leading financial media caiing.com that China has witnessed an average annual salary rise of over 15 percent in the past 10 years, but the pressure of salary hikes may have generally been absorbed by increasing labor productivity.
“We have not found any industries hit by salary rises and suffering continuous decline in share values in the past 10 years,” he said.
Analysts say as China pays increasing attention to the balance of economic structure and accelerate income distribution reform, salary rises will become a trend. It will force Chinese companies to speed up industrial upgrading and increase the contribution of consumption to GDP growth.
Wu said he expects machinery manufacturing, consumer goods, and medical industries to benefit most from the adjustments.