A number of local governments across China have recently announced plans to further raise minimum wage levels in an effort to keep up with the national minimum wage growth target of 13 percent per year, set in the latest 12th Five-Year Plan on Employment Improvement.
In addition, the northern Municipality of Tianjin also announced plans to lift its monthly minimum wage levels by 13 percent, from the existing level of RMB1,160 to RMB1,310.
According to the “Minimum Wage Provisions (MHRSS [2004] No.21),” minimum wages shall not include the following payments:
Overtime payments
Compensations for lunch break or night shifts
Working under extreme or special conditions
Welfare benefits provided in national laws and regulations
The Minimum Wage Provisions also say that local governments should measure their minimum wage levels based on a combination of regional variables, including: average living costs, employees’ personal contributions to the social insurance and housing funds, average wage levels, unemployment rates, and regional economic growth rates.
However, despite regional differences, all four of the areas mentioned above have boosted their minimum wage levels by around or more than 13 percent this year, and this trend will likely continue for the next three to four years, as 13 percent is the annual increase rate the central government has aimed for in its 12th Five-Year Plan.
Seeing the fast increasing operational costs in China’s coastal areas, many investors may consider relocating their factories to China’s western regions, not only to take advantage of the low labor costs there, but also to enjoy the growth potential introduced by the country’s “Go West” Campaign. However, it is worth noting that the local residents’ revenue in those regions may grow even faster than the national average level within the next few years, as it is a specific request made in the “12th Five Year Plan for Further Promoting the Economy of the Western Regions.” For instance, it can be seen that the minimum wage growth rate in Sichuan Province’s first-tier area – which is currently on the government’s priority list for economic development – has reached 23.5 percent this year, almost doubling the national wage development goal.
Dezan Shira & Associates is a specialist foreign direct investment practice and can advise international companies investing in China on the country’s complete legal, tax and operational issues. The firm was established in 1992 and maintains 12 offices throughout China, in addition to practicing in Hong Kong, India, Vietnam and Singapore.
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