Inflation-hit manufacturers brace for new round of hefty pay rises

PUBLISHED : Tuesday, 18 January, 2011, 12:00am
UPDATED : Tuesday, 18 January, 2011, 12:00am

The Guangdong government is considering raising the minimum wage for the second time in less than a year, with pay in Dongguan rising as much as 15.6 per cent, the city's Communist Party boss said.

But the convenor of Hong Kong members of the Shenzhen city Chinese People's Political Consultative Conference said yesterday the wage rises could be meaningless as soaring inflation would force many Hong Kong-owned factories out of business in the coming months.

Dongguan party secretary Liu Zhigeng said on Sunday at a panel discussion with deputies of Dongguan's CPPCC that the average minimum wage would be raised by 15.6 per cent, starting from June. Local media reports other cities in Guangdong are also considering an increase, some as high as 18 per cent.

The official announcement of the rise is expected in the next two months.

The announcement came after Beijing pledged to raise the minimum wage by at least 20 per cent annually over the next five years to boost domestic consumption. But manufacturers in Guangdong said it would do little to solve the region's labour shortage and reverse the wave of factory closures in the region last year.

In May, Guangzhou lifted the monthly minimum wage from 860 yuan (HK$1,015) to 1,030 yuan and Shenzhen to 1,100 yuan in July. Another demand for wage increases among mainland workers has again emerged as the increases were quickly eaten up by runaway inflation.

And it is that inflation that will be fatal to many Guangdong factories in the near future, according to Lam Lap-fong, convenor of Hong Kong members of Shenzhen's CPPCC. 'More than 30 per cent of Hong Kong manufacturers will shut down in Guangdong soon after the Lunar New Year regardless of whether wages are frozen or rise by 20 per cent,' he said yesterday on the sidelines of the CPPCC meeting.

'Most of the factories now have to pay workers about 2,000 yuan per month, almost double the official minimum wage. But it's still hard to retain workers.

'On the other hand, inflation has been skyrocketing on the mainland since last year, sending production costs up by 30 per cent or even more.

'I think we will see the biggest exodus of manufacturing employers in Guangdong since the 1980s.'

A wave of labour disputes swept through mainland factories from May to July last year. Taiwanese-owned electronics manufacturer Foxconn and several Japanese car and parts makers in the Pearl River Delta were hit the hardest.

Foreign-owned factories endured a spate of labour unrest, with most giving in to workers' demands. One of the highest pay rises was 800 yuan a month for workers at Denso, a parts maker affiliated with Toyota.