By Alexander Chipman Koty
Last week, the Guangdong provincial government announced that they will increase the province’s statutory minimum wages from July 1, 2018.
The hike will boost minimum wages in Guangdong, one of China’s wealthiest provinces, by around RMB 200 (US$30.30) per month. It represents the province’s first increase in three years, with the exception of the city of Shenzhen, which administers its wages separately and also increased its minimum wage last year.
Like most regions in China, Guangdong sets different tiers of minimum wages according to the developmental status of the province’s urban clusters.
- Group A: This is the tier for Guangdong’s most developed cities. In this category, Shenzhen increased the monthly minimum wage from RMB 2,130 (US$322.58) to RMB 2,200 (US$333.18), while Guangzhou will increase it from RMB 1,895 (US$286.99) to RMB 2,100 (US$318.03).
- Both Shenzhen and Guangzhou will have hourly minimum wages of RMB 20.3 (US$3.07), with Shenzhen’s having increased from RMB 19.5 (US$2.95) and Guangzhou’s from RMB 18.3 (US$2.77).
- Group B: This tier boasts of cities like Dongguan, Foshan, Zhongshan, and Zhuhai. Here the monthly wage will increase from RMB 1,510 (US$228.68) to RMB 1,720 (US$260.49), and the hourly wage from RMB 14.4 (US$2.18) to RMB 16.4 (US$2.48).
- Group C: This tier includes the cities of Huizhou, Jiangmen, Shantou, and Zhaoqing, where the monthly wage will increase from RMB 1,350 (US$204.45) to RMB 1,550 (US$234.74), and the hourly wage from RMB 13.3 (US$2.01) to RMB 15.3 (US$2.32).
- Group D: This tier consists of smaller cities like Chaozhou, Maoming, and Qingyuan, where the monthly wage will increase from RMB 1,210 (US$183.25) to RMB 1,410 (US$213.54), and the hourly wage from RMB 12 (US$1.82) to RMB 14 (US$2.12).
The minimum wage increases in Guangdong are more or less in line with the minimum wage growth across other regions in China.
Earlier this year, Shandong province – another wealthy coastal region – increased its monthly minimum wage to RMB 1,910 (US$289.26) at the highest tier and RMB 1,550 (US$234.74) at the lowest tier.
Yet, the changes are notable given that Guangdong had not adjusted its minimum wages in three years, a relatively long period of time compared to the rest of China.
Last year, 20 out of 32 regions in mainland China (including Shenzhen) increased their minimum wages.
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Until now, the Guangdong provincial government had frozen its minimum wages at 2015 levels in an effort to maintain economic competitiveness. Guangdong is one of China’s most economically vibrant regions, boasting the highest GDP of all regions in the country.
However, Guangdong’s dependence on manufacturing – which earned it the moniker “the factory of the world” – has exposed the province to competition from lower cost jurisdictions both inside and outside of China.
With rising labor and land costs in Guangdong, many investors are choosing to relocate the manufacture of low-value and labor-intensive products to lower cost areas in western China and Vietnam.
Nevertheless, even with the minimum wage increases, the lowest tier of wages is still lower than the lowest tier in far less developed regions in China, such as Sichuan, Guizhou, and Xinjiang.
The modest wage increases for the lowest tiers suggest that the Guangdong provincial government remains concerned about the province’s economic competitiveness going forward, despite the region’s obvious strengths.
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