KEY POINTS:
Wages in China are on the way up - good news for its workers and their families struggling with increasing food prices - but bad news for Western countries like New Zealand that have benefited from its low-cost exports.
China's economy, the world's fourth largest, is expected to
grow by 10.5 per cent this year and 10 per cent next year.
But this growth is testing China's capacity. Inflation, particularly on food items such as pork, has also been rising sharply.
And the cost of labour, wages, in other words, has also been rising, by about 20 per cent in nominal terms by one estimate.
One manager of a New Zealand boutique fund, who declined to be identified, said he had been a market bear throughout the credit crunch and had become more bearish last week after visiting China, citing concerns about wage inflation.
"I see so much inflation being exported from China, where it has previously been a source of deflation for so long."
The fund manager was part of a group including New Zealand equity analysts and journalists taking a look at Guinness Peat Group-owned threadmaker Coats Plc's operations in South China.
The visit included the opportunity to look around a couple of the big factory complexes that carpet much of the Pearl River Delta in China's Guangdong province.
Coats' plants are regarded as near the top of the heap in terms of working environment but a visit to one of Coats' major customers in South China, the world's third largest shoe maker Stella Group, provided a more representative view of working conditions in the region.
Stella's plant at Dongguan near Shenzhen comprises two factories with a combined workforce of 14,000.
Stella's workforce has an average age of 22, and 95 per cent are migrants from elsewhere in China.
Labour turnover here in the factories of the Pearl River Delta is around 40 per cent a year and at Coats' plants it runs at 5 per cent a month.
Workers leave to return to their home provinces to start families or to earn better wages in another factory down the road. Often those higher wages are achieved by working overtime in excess of the legal allowance.
Businesses like Coats will try to offer some work life balance to their staff by organising inter-factory sports and day trips, but it seems many workers simply want to work as long as possible to make as much cash in as short a time before going home.
The average wage for workers at Stella's plant is 1300 renminbi ($250) a month. Coats' workers make about 2000Rmb a month, which works out to $1.60 an hour in take-home pay once tax, subsidised accommodation and food charges are taken out. The minimum wage in this part of Guangdong is about to go up from 750Rmb a month to 900Rmb.
* Adam Bennett travelled to China as a guest of GPG.
