China’s 2014 Q1 Minimum Wage Hikes

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SHANGHAI – In the wake of recent reports of coming increases to the minimum wage in Beijing, Shanghai and Tianjin, one question may be on the minds of foreign business leaders active in the country: what is the minimum wage in China?

The answer to this seemingly simple question turns out to be quite complicated for a number of reasons. First off, the specific standards are set in individual cities, provinces and other administrative units by their respective local government. At the next level, each of these units is commonly divided into a number of classes, whose minimum wages vary according to local socioeconomic conditions. Lastly, minimum wage must be differentiated between minimum monthly salary and minimum hourly wage (for full-time and part-time workers, respectively).

In keeping with the more developed economies and higher living standards in Beijing, Shanghai and Tianjin, these cities received comparatively higher increases this year: monthly minimum wages rose by 11.4, 12.3, and 12 percent, respectively, and hourly minimum wages by 11.2, 21.4, and 12 percent, respectively.

Of these figures, Shanghai’s 21-percent increase to the hourly minimum wage is likely to carry the most significance for businesses and results in Shanghai having overtaken Shenzhen’s claim to the highest hourly wage in China.

RELATED: Minimum Wages in China and India

It is also noteworthy that these figures describe increases to net income only and do not take into account deductions, such as pensions or social insurance.

China’s legal provisions on minimum wage disseminated in 2004 require that the minimum wage of all regions be increased at least once every two years and the 2011-15 Five Year Plan stipulates that this increase should average 13 percent per year.

By April of this year, wages have been hiked in a total of seven areas: Beijing, Shanghai, Tianjin, Chongqing, Shaanxi, Shenzhen, and Shandong. If this trend continues through the rest of 2014, some 28 regions might see increases to their minimum wage.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam in addition to alliances in Indonesia, Malaysia, Philippines and Thailand as well as liaison offices in Italy and the United States.

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