Salary growth slows in China

Mainland wage gains have moderated on weaker corporate profits, capping consumer demand as the government seeks to sustain a rebound after a seven-quarter economic slowdown.

Average urban salaries rose 12 per cent in the first nine months from a year earlier without adjusting for inflation, slowing from 14.4 per cent for all of last year and 13.3 per cent in 2010, government data shows. Restaurant operator Yum Brands reports smaller pay increases, and labour ministry data shows the same for minimum wages.

Deeper declines in wage growth would undermine efforts by the new leadership under Xi Jinping to boost consumer spending and shift the world's second-biggest economy away from dependence on investment and exports.

Overcapacity in manufacturing is weighing on profits, with the latest reading due today when the statistics bureau releases industrial companies' net income for the year to October.

"Given the poor profit picture, wage growth is bound to slow down in the coming quarters and this is set to reduce the robustness of consumption," said Louis Kuijs, chief China economist at Royal Bank of Scotland in Hong Kong, who formerly worked at the World Bank in Beijing.

"The expected slowdown will impact the rebalancing in the sense that it will reduce the relative role of consumption in the short term."