Trend to continue as companies feel squeeze on profits, experts suggest

Wage increases, in percentage terms, fell dramatically last year and the trend will continue as economic expansion slows, experts said.

The annual income of workers categorized as non-private sector, those in State-owned enterprises, collectively owned businesses and enterprises funded by foreign investment, stood at 42,500 yuan ($6,660) in 2011, a rise of 14.3 percent from a year earlier.

In percentage terms this represented a 0.8 percentage point increase from 2010.

But wage growth from a year earlier, 2009 to 2010, was almost double at 1.5 percentage points, according to the National Bureau of Statistics.

Workers in the private sector suffered the same fate. They had an average annual income in 2011 of 24,500 yuan, a year-on-year increase of 18.3 percent. But wage growth the previous year was 14.1 percent and in 2009 was 6.6 percent. In percentage terms, wages grew by 7.5 percentage points from 2009 to 2010 but by 4.2 percentage points from 2010 to 2011.

Of the 23 provinces, autonomous regions and municipalities that released their 2011 wage figures, 15 saw falling wage growth.

In South China's Guangxi Zhuang autonomous region, average wages increased by 1.54 percent in 2011, 11 percentage points lower than 2010.

In North China's Hebei province, the fall was 7.5 percentage points from 13.8 percent in 2010.

Southwest China's Chong-qing municipality saw wage growth decline by 6.5 percentage points to 7.6 percent.

The wage growth drop for Guangdong was 4.7 percentage points, in Shanghai it was 2 percentage points and in Beijing it saw a fall of 1.8 percentage points.

But some places did experience rising wage growth. Fujian province's year-on-year growth stood at 19.4 percent in 2011, 5.5 percentage points more than 2010.

Yunnan province saw growth rise 5.2 percentage points above the previous year. In Hunan, it rose 4.8 percentage points above 2010.

Liu Junsheng, a researcher with the labor and wage institute under the Ministry of Human Resources and Social Security, attributed slower wage growth to comparatively high growth in 2010 and a general slowdown in the economy.

"In 2008 and 2009, when the global financial crisis really hit hard, many enterprises did not increase wages in order to avoid cutting employment. So when the worst was over, wages saw a comparatively big rise in 2010," he said.

As the economy is slowing down, the trend of falling wage growth will continue, Liu said.

Dragged down by lackluster external demand and government efforts to cool the property sector, GDP growth slowed to a three-year low of 7.6 percent in the second quarter.

Premier Wen Jiabao also said at a weekend conference in Chengdu, capital of Southwest China's Sichuan province, that the rebound is not yet stable and economic hardship may continue.

Profits at State-owned enterprises fell 11.6 percent year-on-year to 1.02 trillion yuan ($161.4 billion) in the first half of 2012 but showed a 20.6 percent rebound in June, according to the Ministry of Finance.

"In general, wages will continue to rise, but companies will face pressure paying more,'' said Liu Junsheng.

Official figures showed that from January to May, profits at industrial companies fell 2.4 percent, despite an 11.9 percent growth in revenue in the same period.

In one month, May, profits at these companies fell 5.3 percent.

Feng Lei, a researcher with the institute of finance and trade economics at the Chinese Academy of Social Sciences, said industrial companies will face pressures on profit.

In fact, some enterprises are already feeling the pinch, according to one businessman.

"Labor costs are rising,'' said Gu Zhongwei, general manager of the fabric department at Handa Enterprise in Wuxi, in East China's Jiangsu province.

"This, combined with the stagnant international market, has eaten into company profits. Some are down by 20 percent.

"I'm afraid our company's annual profits will drop by 30 to 40 percent this year," he said.

A human resources officer with a State-owned manufacturer in Shenyang, capital of Liaoning province, said his company is experiencing a fall in domestic and overseas demand.

"In 2008, we even cut employment to sustain our business," he said. "Although now the situation is not as bad as it was back in 2008, everybody in the company clearly knows that the possibility of a wage rise this year is slim," said the officer, who declined to be named.

In the wake of slowing economic growth, 16 regions in the country raised the minimum wage this year with an average increase just under 17 percent. In 2011, 25 areas raised their minimum wage by 22 percent.

Shi Jing and Wu Yong contributed to this story.

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