China labour shortage prompts wage rises

China's decades-old 'one child' policy has led to labour shortages that could see an end to the country's reputation as a low-wage economy.

The policy, introduced in 1978 to combat the country's rising population in the wake of the Cultural Revolution, limits Chinese families to a single child.

Now the population curb is helping to put power back into the hands of the workforce.

Foreign investors are starting to see wage demands increasing, as labour shortages enable Chinese workers to flex their industrial muscle.

A supplier to motor company Honda recently suffered production stoppages due to workers striking for higher pay. Toyota's Chinese workforce has also staged a partial walkout.

"China's days of low wages are over," Lee Pyeong-bok, an advisor to a state-run agency aimed attracting investment from Korean firms, told a domestic business forum.

"China's one-family, one-child policy has caused labour shortages and as a new generation of workers are entering the labour market, their awareness of labour rights is heightening," he said.

According to US Census Bureau figures quoted in the English-language Korea Herald newspaper, the number of 15 to 24-year-olds joining the Chinese work force will drop by 29 per cent over the next 10 years.

In an attempt to head off unrest, the world's largest contract laptop maker has announced it is to increase the wages of its Chinese workers, according to a report in today's Washington Post.

Taiwan-based Compal Electronics produced 38 million laptops last year - 23 per cent of the world's total - mostly from its plant in the Chinese city of Kunshan, near Shanghai.

Compal today said that labour shortages in China posed an added difficulty to the company's hopes of capitalising on an upturn in the global market.

But company chairman Hsu Sheng-hsiung pledged that, rather than ditching China for even cheaper pastures, Compal would increase wages and improve working conditions for its Chinese workers.

"Corporations must not relocate for the sake of wage concerns like nomads chasing new grasslands," he said.

So how much more was Compal offering, exactly? A "small amount", Hsu said. And refused to elaborate.

The conditions of workers in China made headlines earlier this month due to a spate of suicides among workers employed Taiwanese IT giant Foxconn.

In a bid to head off criticism, the company promised to raise basic wages at its facility in southern China from 900 yuan ($130) to 2,000 yuan a month, beginning in October – though critics still point to harsh conditions at the plant, where workers are allegedly banned from speaking to each other during 12-hour shifts, all of which are spent standing.