Thirteen Chinese provinces and cities have adjusted their minimum-wage standards in the first quarter of 2011, with an average increase of 20.6 percent. Most of these adjustments took effect in April or May, raising minimum wages to more than ¥1,000 (US$154) per month in around 10 provinces and cities, mainly in eastern China. These new laws are part of a general pattern of increased minimum wages across the country over the past year. Labor shortages, a spate of strikes, and surging inflation have contributed to the trend in rising wages.
Chinese minimum-wage standards are separated into monthly minimum wages for full-time employees and hourly minimum wages for part-time employees. Wage standards, determined by provincial governments (i.e., municipalities, provinces, and autonomous regions) must be adjusted at least biennially.
Local governments base wages on a variety of factors, including, among others, the cost of living, average wages in the area, the consumer price index, economic development levels, and employment conditions in the area. Under these conditions, minimum-wage standards vary widely among regions. For instance, the minimum wages are as high as ¥1,310 (US$202) per month and ¥10.7 (US$1.65) per hour in Zhejiang Province, but as low as ¥500 (US$77) per month and ¥4.7 (US$0.73) per hour in Jiangxi Province. This explains, in part, why some companies are relocating facilities to China’s inland regions, where minimum wages can be considerably lower than those found near the coasts.
Within a region there is also variance, as provincial governments set different standards for the areas within their jurisdictions, with particular emphasis on a locality’s level of economic development relative to its neighboring areas and the government’s development policy goals for the area. For example, officials have established three minimum-wage levels within the Ningxia Hui Autonomous Region.
There are also differences in the components that make up the minimum wage that can complicate comparisons of rates throughout China. For instance, Shenzhen and Shanghai are among the cities with the highest minimum-wage rates in the country. Officially, Shenzhen’s rate of ¥1,320 (US$204) is higher than Shanghai’s, which is ¥1,280 (US$198). In Shanghai, however, employee contributions to the housing fund are excluded from the minimum wage, whereas in Shenzhen such contributions are included, which in practice results in a higher minimum wage in Shanghai than Shenzhen when this is taken into account.
This example and the others above underscore the importance of understanding differences not only in the stated minimum-wage rates themselves, but also in the components of those rates that determine whether they are met, as well as the factors influencing the changes in rates within and among regions and provinces and at the local level. These increases followed the announcement in February 2011 that the National People’s Congress revised the PRC’s Criminal Law to make it a crime for a company intentionally to withhold employee wages if: (1) the company has the means to pay the wages; (2) it willfully withholds payment by either refusing to pay or transferring assets to escape the obligation to pay; and (3) the situation or its effects are “serious.” Whether this law will have an effect on how the PRC government implements and enforces the rules remains to be seen.