By Ziyang Yin and Nick Marro
Minimum wages in China’s major cities rose in 2016, signaling the continued development of an emerging consumer class as much as increasing pressure on company labor costs. But the increases also point to an increasing divide, as wage growth stagnates in the majority of China’s provinces.
The US-China Business Council (USCBC) compiled data on minimum wage increases across China into several charts and graphs to help companies understand the labor situation of their local operations.
Who qualifies for minimum wage?
Local governments were previously required by Ministry of Human Resources and Social Services (MOHRSS) to adjust the minimum wage level every two years for full time employees (20.83 days per month, as stipulated by the Labor Law) and contract employees who work a set schedule. Minimum wage levels are normally determined by local factors, such as the cost of living, average wages in the province, housing funds, and medical and social insurance.
In May 2016, MOHRSS granted provinces more flexibility by requiring authorities to adjust minimum wages every two to three years.
Where are costs rising?
All four major municipalities (Beijing, Shanghai, Tianjin, and Chongqing) and five provinces (Liaoning, Jiangsu, Hainan, Shandong, and Hebei) saw gains in monthly wages in 2016 an average of 10.7 percent, a slower rate than previous years, which can be attributed to slower economic growth. Shanghai remains the city with the highest minimum wage, with workers entitled to RMB 2190 per month. Shenzhen (RMB 2030), Guangzhou (RMB 1895), and Beijing (RMB 1890) round out the top four. Because MOHRSS only requires adjustments once every two to three years, many provinces did not change the monthly minimum wage this year.
|China Minimum Wage by Region (RMB)|
|Region||2016 Monthly Minimum Wages||2015 Monthly Minimum Wages||2014 Monthly Minimum Wages|
|Guangzhou (Tier 1)||1895 (Unchanged)||1895||1550|
|Inner Mongolia||1640 (Unchanged)||1640||1350|
|Qinghai||1270 (Unchanged)||1270 (Unchanged)||1270|
How do the four Tier 1 cities compare?
Figure 1: Monthly minimum wage comparison between China’s four Tier 1 cities from 2014 to 2016.
How fast have minimum wages increased?
Figure 2: Comparison of monthly minimum wages in China’s four major municipalities from 2014-2016.
Wage growth continues to be strong; in Shanghai it jumped nearly 17 percent between 2014 and 2016. Wages in Chongqing grew 16 percent during this period, but the absolute wage level remains lower in that city than in the other municipalities.
How do eastern, western, and central China compare?
Figure 3: Comparison between geographic regions’ monthly minimum wages growth from 2014-2016 (excluding four major municipalities).
Minimum wages have drastically increased—by 15 and nearly 16 percent—from 2014 to 2015 for China’s eastern, central, and western regions; however, the absolute minimum wages remain comparatively low.
Eastern China leads minimum wage growth in terms of absolute value, due to its position as a more developed part of the country.
Wage growth largely stagnated in central and western China between 2015 and 2016, with those provinces taking advantage of MOHRSS provisions allowing them to adjust minimum wages only once every two to three years. These figures stand in contrast to local GDP figures, which paints growth in these regions as largely stable.
About the authors: Ziyang Yin and Nick Marro provide business advisory services for members of the US-China Business Council. USCBC is a private, nonpartisan, nonprofit organization of more than 200 American companies that do business with China. Founded in 1973, USCBC has provided unmatched information, advisory, advocacy, and program services to its membership for more than four decades. Through its offices in Washington, DC, Beijing, and Shanghai, USCBC is uniquely positioned to serve its members’ interests in the United States and China.