From Chinese Press

Wage increase a healthy sign

(China Daily)
Updated: 2010-06-17 07:55

Increase in workers' wages and the resultant rise in labor cost, some media reports say, could make foreign enterprises shift base from China. But contrary to popular belief, low labor cost is just one of the reasons why foreign enterprises have chosen to invest in China, says an article in Oriental Morning Express. Excerpts:

To reduce frictions between labor and capital, Foxconn announced recently that it would raise its employees' salaries. This news led a section of the country's media to say that other foreign companies could be compelled to raise their employees' pay and the resultant rise in labor cost could force some of them to close shop in China.

Facts, however, do not support this view. Actually, an enterprise considers many factors before deciding to invest in a place, and labor cost is just one of them. The market order, government services, and even local culture play important roles in foreign enterprises' decision to set up shop in a country. For the past few years, the low pay of workers has been thwarting sustainable development of the Chinese economy.

The rise in salaries will thus boost consumption, instead of worsening the investment environment.

(China Daily 06/17/2010 page9)