Sourcing: minimum wages continue to rise in China

As at 12 April 2023, Shanghai was receiving the minimum wageMonthlyhighest among the 31 provinces of China (2590 RMB or about EUR 343 per month) and Beijing minimum wagehoursthe highest (RMB 25,3 or EUR 3,35 per hour). The monthly minimum wage applies to full-time employees and the hourly minimum wage applies to part-time or temporary employees.

The monthly minimum wage14 regions(including Beijing, Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Anhui, Fujian, Shandong, Henan, Hubei, Guangdong including Shenzhen, Chongqing and Sichuan) surpassed the symbolic mark of the 2000 RMB (about 264 EUR) against six regions in 2021 (cf.Sourcing China: Provinces raise minimum wage in 2021). At the lower end of the salary scale, Guangxi (1430 RMB or EUR 189 per month) is barely higher than Liaoning (1420 RMB or EUR 187 per month).

In China, provincial governments set minimum wage standards, taking into account factors such as the cost of living of local employees and their dependants, the consumer price index for urban residents, the level of economic development and the local employment situation, etc.

The minimum wage is the basic wage paid by the employer, excluding overtime pay and various allowances (night work, high summer temperature, special work environment or subsidies for meals, transport and accommodation). However, in many regions minimum wage standards include social insurance premiums and contributions to the housing fund paid by employees. In practice, therefore, it is possible that an employee's net wage is lower than the corresponding minimum wage in these regions. Only a few provinces, such as Shanghai, do not include social insurance premiums and contributions to the housing fund in the minimum wage.

Total labour cost in China

On the employer side,minimum wages represent only part of the labour cost in China. The employer's obligations with regard to social insurance and housing funds add about 37% to the cost of labour, in addition to the gross wages of employees.

As the Chinese economy progresses and makes a transition to innovation and the service sector, most workers employed by foreign investment firms earn more than the minimum wage. For example, Shanghai workers received an average of RMB 10338 (EUR 1370) per month until 2020, almost four times the local minimum wage.

The increase in Chinese wages is a criterion that must be taken into account when deciding whether to start business in the country. However, taking into account other factors such as productivity, infrastructure, transport costs and access to a huge domestic market, China remains a cost-effective option compared to countries with lower statutory labour costs.

Finally, by observing the location of foreign investment in China, minimum wages are a useful barometer for comparing labour costs in different regions.

To go further...

• Sales Administration (SDA) Subcontracting Export
• Import/export flow management (air & maritime)
• Diagnosis of international logistics flows

Thanks to ourGlobal Supply Chain Management Experts, move from a transport policy at least so-called to a real supply chain strategy efficient, secure and efficient!

Source(s): China Briefing

Editor(s): | C.BEDOUIN