The statutory minimum wage [2] in the eastern province of Zhejiang will increase by 12.2 percent on 1 January next year to reach 1,470 yuan per month in major cities such as Hangzhou, Wenzhou and Ningbo. The move will put more pressure on Guangdong, Zhejiang’s main manufacturing rival, to announce a similar increase early next year.

Guangdong has already postponed a planned increase in the minimum wage [3] from 1,300 yuan per month to 1,470 yuan for nearly one year following vociferous objections from the business community in the province. But if Guangdong is to remain competitive in the labour market next year, basic wages for factory workers will now almost certainly have to go up.

Guangdong’s manufacturers have been faced with labour shortages for several years now as the cost of living in the province increases and more employment opportunities open up for migrant workers closer to home. The two main exporters of rural migrant labour in central China, Sichuan and Henan, for example, both now have more rural labourers employed inside the province than outside it.

Many of Guangdong’s low-cost, labour-intensive manufacturers have already gone out of business or relocated to inland provinces or other Asian countries such as Bangladesh and Cambodia because of higher costs. However the process of upgrading to more value-added and high-tech manufacturing will take several more years and tensions between the needs of employers and employees will undoubtedly remain.

In Zhejiang next year, the urban minimum wage will be just above that of Shanghai (1,450 yuan per month) and just below that of Shenzhen, which currently has the highest rate in the country at 1,500 yuan per month. Even in the least economically developed counties of Zhejiang, the minimum wage of 1,080 yuan per month will still higher be than many major inland cities such as Chongqing and Chengdu [4].