Chinese Profitability Squeezed Further By Third Year Of Double-Digit Wage Gains

For the third year in a row (since the crisis) average pay at private companies in China surge by greater than double digits - far outstripping GDP growth. 2012 saw a 17.1% nominal rise in average wages for private companies to Yuan 28,752 per annum (still 9% after inflation) but dispersion remains high with "significant gap among regions, industries and specific jobs in some sectors." The continued rise in wages, as the Wall Street Journal notes, is likely to put further pressure on an already pinched manufacturing and construction sector (which accounts for over 41% of all Chinese employment) especially in low-end and labor-intensive positions. With slowing growth (demand) and rising costs (labor, energy), the profitability of Chinese companies is increasingly tenuous and only hindered by potential actions of the central bank.

3rd year in a row of strong double-digit wage growth... and while growth slowed in nominal terms, it rose in inflation-adjusted terms...

 

Via WSJ,

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The increase moderated slightly from the previous year in nominal terms but was actually faster when inflation was taken into account.

 

Average wages for employees at non-private enterprises were up 11.9% from the year before in nominal terms, to 46,769 yuan ($7,543), the National Bureau of Statistics said in a statement Friday, compared with a 14.4% pace in 2011.

 

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Slower economic growth has affected nominal salary increases, the statistics bureau said, but real salary growth - after inflation - accelerated in 2012 as "companies actively responded to rising competition [in the labor market] and tried to ease recruitment difficulties."

 

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With inflation taken into account, wages of employees at nonprivate companies were up 9% in 2012 from a year earlier, exceeding 2011's 8.5% pace. Real wages in the private sector were up 14%, accelerating from 12.3% in 2011.

 

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Nominal wages at nonprivate enterprises were up 13.6% in both the manufacturing and construction sectors, to 41,650 yuan and 36,483 yuan, respectively.

 

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"China will continue to deepen its reforms of income distribution,...  to help middle and low income people,"