Warning over rising-wages effect

PUBLISHED : Wednesday, 13 August, 2003, 12:00am
UPDATED : Wednesday, 13 August, 2003, 12:00am

The mainland economy may now be one of the most competitive in the world, but many underlying problems may still derail the nation's fast growth trajectory, a leading economist warned yesterday.

'Our No 1 advantage at the moment is our low cost base,' said Zhang Weiying, vice dean of Peking University's Guanghua School of Management, at the launch of the Chinese edition of the World Economic Forum's 2002-2003 ranking report on world competitiveness. 'This is because our labour cost is low. But we must also realise that it is difficult to maintain our low cost advantage forever.'

In the report, China jumped six notches from 39th place to 33rd place in terms of growth competitiveness and five places from 43rd to 38th in terms of microeconomic competitiveness.

Aside from the competitiveness that foreign enterprises bring to the mainland, Professor Zhang said he was not sure just how competitive Chinese enterprises fared in the global marketplace.

'Our private enterprises - especially those in the high-tech sector - are competitive, and this too is because they have access to a low-cost base.

'But we must remember that many of our college graduates are increasingly getting higher wages,' Professor Zhang said.

'We must also remember that Japan ran into trouble because high wages caused it to lose out to the US in high-tech manufacturing and to China and Southeast Asia in terms of labour intensive manufacturing.'