Wage Inflation Emerges as Key Issue in China Manufacturing Sector

Published Date : Nov 30, 2015

A few years back China emerged at the forefront of world map as the second largest economy and the top manufacturers of the world. This exponential rise of China’s manufacturing sector is often attributed to the tens of millions of Chinese workers who agreed to work for more hours at lower wage. 

However, with time the model is also changing rapidly. 

Laborers in China have realized the value of their labor, hence the country now faced acute labor shortages, which in future will force the Western brands to either remake their operations in China or simply pack things up and leave the country, as told by a recently published article on the Wall Street Journal. The article also pointed out that the transformation will mark the beginning of a new chapter in the globalization history, where automation will take the forefront and nearness to the market will appear as one of the most crucial aspects. 

This change witnessed by the manufacturing sector in China is brought about by a plethora of factors. While the factory wages given in China still remain low compared to the Western standards, they have been rapidly increasing over the last couple of years, thereby eroding China’s competitive advantage against the developed economies as well as against nations such as Cambodia, Vietnam, Ethiopia, and Bangladesh. This change has been particularly apparent in the apparel sector, where shifting operations is relatively easier due to the prevalent labor intensity. 

Therefore, the apparel sector is now looking forward to a wide-scale automation. According to reports, a supplier located in the Zhongshan area who produces jeans for Levi’s has already strated using automated lasers. With this the company has successfully replaced dozens of workers who once were allotted with the task of rubbing Levi’s blue jeans with sandpaper that gave the jeans a worn-out look.