More Bad News For Chinese Consumers, Real Estate and Reform

WSJ: China Should Rein In Wage Increases, Official Says

Xin Changxing, a vice minister in China’s labor ministry, said slower wage growth must be paired with efforts to restructure uncompetitive industries and improve productivity in labor-intensive sectors, in an effort to avoid mass layoffs.

Chinese wages grew faster than the economy over much of the past decade, lifting workers’ living standards but also diminishing China’s competitive edge, particularly when compared with other developing Asian countries that rely on low-wage manufacturing.

“Our advantage in labor costs is no longer as clear-cut as before,” Mr. Xin said. “We should ease the frequency and scale of wage increases so as to preserve our competitive advantage.”

The slowdown is already under way in terms of minimum-wage growth. Six provinces and municipalities raised their minimum wages by an average of 11% in the first half of this year, compared with the 13 regions that did so by an average of 13.5% from January to June 2015, Mr. Xin said.

...The southern province of Guangdong—a major manufacturing center—announced a two-year freeze on minimum wages in February, while Shanghai unveiled in March its slowest minimum-wage increase since the global financial crisis. A number of local governments have since eased social-security burdens on businesses, cutting the contribution rates that companies and employees must pay toward welfare benefits for workers.

He is not wrong in wanting to keep wage growth down in order to reduce unemployment, but that is bad news for reform efforts, consumers and real estate. It signals the economy is slowing. It's also bad news because the central government is getting more involved in controlling wages.

His full remarks are in Chinese here: 人社部：应该适度放缓工资调整频率与提高幅度