MOC: China Not Solely Dependent on Its Cheap Labor Force

Until now, the multinationals preferred the countries with a cheap labor force, which was China’s biggest advantage. However, the status quo has been changed.

What do I think of the foreign investment environment in current period? In my opinion, the low salary level or cheap labor force is no longer the biggest advantage of China to attract the foreign investment.”

Yao Jian, spokesman of the Ministry of Commerce (MOC), made this statement while discussing the current trend of increasing salaries of foreign-funded companies Yao said that this year’s export is still not optimistic. Meanwhile, he stressed that the increase of minimum salary in several places is to be expected and that the trend of increasing salary initiated by the Honda and Foxconn’s incidents will not affect China’s recruitment of foreign investment.

Recently, the trend of increasing salaries started from the coastal areas of China and then gradually expanded into the inland areas. Despite Yao’s statements, some experts believe that raising China’s basic salaries will impair China’s appeal for foreign capital. At the beginning of the year, Shenzhen, Beijing and other cities experienced minimum wage increases, which will of course pull up the labor cost in these places.

However, analysts state that salary increase will encourage domestic consumption within China, which will enable its economy to become less dependent on exports.  The drawbacks of increased labor wages for investors will be countered by newfound motives to seek further capital in a country whose economy is strengthened by greater domestic consumption.

Previously, Jia Youjun, director of the Taiwan Electrical and Electronic Manufacturers Association, said that Foxconn’s increasing salaries for its employees is accompanied with the upward production cost in Mainland China. The increasing cost will force some Taiwan-based electronic companies to withdraw their investment in Mainland China.

When asked about the influence over the foreign investment, Yao Jian denied that labor force is the only, or even the biggest advantage of China for the foreign investment.

He claimed that China’s biggest advantage lies in the stable political environment, growing economy and optimizing legal environment.  Another important factor is the huge market that China owns.

Yao Jian added that China is blessed by consummate industrial supporting capacity, as well as the improving quality of labor force. In addition, the western and middle part of China still assembles a large group of labor force, which could meet the demand of labor-intensive companies.

The concerns about the possible impairment to foreign investment in China also come from the increasing minimum wage. At the beginning of this year, the minimum wages of many places increased. So did the production cost in these places.

Yao Jian pointed out that the changes in the national economic development and industrial policies. The ultimate goal is to make more people enjoy the achievements of economic development.

He said: “Employment is the first issue while increasing salary is second to it.”