Beijing City lifts their minimum wage by 21%

Minimum wages in China are decided at the provincial level and, in a move designed to soften growing social tensions among the lowest income households, the Beijing City government has announced a further steep rise in their minimum wage - a 21% rise that will take effect in the New Year. The statutory minimum monthly wage in the Chinese capital rises on New Year’s Day to $175 and it is now 40% higher than at the start of 2010.

A high pay floor is a direct response to rampant food price inflation in many parts of China - agflation that has hit the poorest hardest because they spend a disproportionately large share of their income on basic foodstuffs. It is also a reflection of what might already be a decisive movement away from China’s reliance on low wage manufacturing as the basis for export success.

The Chinese government is under huge pressure internationally to shift towards higher levels of domestic consumption as a way of addressing structural trade imbalances with many other countries. Household consumption was just 35.6 per cent of Gross Domestic Product in 2009, down from 46.1 per cent a decade earlier. Higher domestic wages might also mean that millions of Chinese do not need to save as much in the absence of a welfare safety net.

Related articles:

China’s soaring wage bill (Money Week, June 2010)
The Chinese consumer awakens (Reuters, December 2010)
World’s workshop heads to inland China (Reuters, August 2010)

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