China faces labour crisis

Economist says manufacturing edge fading

Standing on a street corner near Foxconn Technology Group’s plant in central China that makes iPhone 5 handsets, employee Wang Ke says he’ll quit if his wage doesn’t double.

“I don’t have high expectations, I know I’m a migrant worker,” said Wang, 22, who earned 1,600 yuan ($ 258 US) in December, after deductions for lodging. “But I want to make 3,500 yuan a month, net. That’s a fair price.”

Wang’s attitude springs from a labour- market squeeze across the country after China’s pool of young workers shrank by almost 33 million in five years at the same time as industry added 30 million jobs.

“China’s advantage in lowcost manufacturing will end much sooner than expected, I believe within five years,” said Shen Jianguang, Hong Kongbased chief economist at Mizuho Securities Asia Ltd.

“More companies will consider moving to countries such as Vietnam, Indonesia and the Philippines.”

Higher pay and the relocation of factories are undermining China’s three- decade export model that concentrated production, cheap labour, infrastructure and supply chains in one place, allowing savings that made it the world’s supplier of low- end goods.

As manufacturing costs rise, price increases will be passed on to the world, said Tao Dong, head of Asia economics excluding Japan at Credit Suisse Group AG in Hong Kong.