Thumbnail: 

Fitch Ratings expects further wage rises at Chinese technology manufacturers in 2012 to be largely offset by the absence of one-off costs incurred in 2011 in moving production capacity inland.

The rating agency still sees a move to even lower cost locations outside China as unlikely in the short term due to labour's relatively low proportion of total costs for most technology products.

Nevertheless, recent reports of labour unrest at tech manufacturer Foxconn highlight the continuing trend of rising labour costs in China.

Fitch highlighted in 2010 the threat to tech companies from rising wage costs at production facilities. As predicted, this led in 2011 to many moving facilities inland, where wages have historically been lower. This entailed significant costs in setting up new factories, training personnel and logistics.

"We believe wage rises will continue into 2012. This is to be expected where real GDP is growing at close to 9%. Some catch-up in wages in inland provinces is also likely as factories migrate there. The latter is part of a longer-term trend - the Chinese National Bureau of Statistics estimated the wage advantage of being inland compared with on the coast had shrunk to 11% in 2009 from 19% in 2003," says Fitch.

MORE ARTICLES ON COMPENSATION AND BENEFITS

Quote Image: