Guangdong, the Chinese province in the Pearl River Delta where practically everything you've bought in the past ten years was made, is about to see a minimum wage increase effective Jan 1, with some workers seeing increases as high as 20 percent. Guangdong has experienced high inflation. The wage increases, combined with weak western currencies, suggests that prices for virtually every consumer good in the west will rise significantly in the new year. The experts quoted in this Global Post article say that while other cheap labor markets exist in places like Bangladesh, they lack the scale and infrastructure of south China and are unlikely to provide a substitute.
For decades, Guangdong province and China’s Pearl River Delta have been at the heart of China’s economic rise. And while larger manufacturers and state-owned companies have contributed greatly to the boom, smaller and medium-sized private firms have also helped propel China to become the world’s second-largest economy.
As wages, raw material costs and other costs rise, those smaller businesses say they’re being cut out of the mix.
Lau said at the current rate, he expects 30 percent of factories in Guangdong to reduce production or close down this year, in the wake of a minimum wage increase last year. Another 18-20 percent pay rise would decimate the industry.
But Crothall is less than sympathetic, noting that although China’s inflation rate has slowed somewhat, China’s workers still need more to get by.