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Southern China fights inflation by hiking wages

Officials hope raise will offset rising prices and stave off social unrest

SOUTHERN China took steps to combat rising inflation yesterday with the manufacturing hub of Guangdong province set to raise minimum wages by 13 per cent after the Chinese New Year.

Over in the autonomous casino enclave of Macau, its government yesterday also proposed a 7 per cent pay rise for civil servants.

The moves come as soaring property prices helped push up inflation to over 5.3 per cent.

Guangdong’s labour chief Fang Chaogui said yesterday that the rise of 12.9 per cent – to be introduced in stages – will offset spiralling consumer prices, which many fear could lead to social unrest, especially among low-income households.

Prices of food soared 9.1 per cent on average across the province last year, compared to just 2.4 per cent in 2006.

Guangdong’s consumer price index rose 3.7 per cent in 2007 – the biggest jump in a decade.

‘The plan to raise the minimum wage has been submitted to the provincial government for approval and should be ready for implementation after the Chinese New Year,’ Mr Fang told the media in Guangzhou, the provincial capital.

While the Guangdong authorities have raised minimum wages several times in recent years, these were aimed more at turning the region’s labour-intensive manufacturing base into a high-value, service-oriented hub rather than warding off inflation.

Guangdong governor Huang Huahua pledged during the province’s recent party congress meetings to cap inflation at 4 per cent this year.

Academics and analysts welcomed the rise in minimum wages, given that inflation and a widening salary gap could further fuel social tensions in the affluent south, where an increasing number of people have become millionaires following the opening up of China’s economy over two decades ago.

Guangdong was among the first areas in China to be liberalised, and this attracted a flow of investments from the neighbouring financial hub of Hong Kong.

As an economics professor at Guangzhou-based Jinan University noted, the difference between average and minimum wages on the mainland as a whole still lags behind international standards.

Globally, minimum wages typically make up 40 per cent to 60 per cent of the average wage – a benchmark that mainland China has not yet reached, said Professor Han Zhaozhou.

The minimum wage in Guangzhou, he noted, was 780 yuan (S$150 ) per month in 2006 – or just over 25 per cent of the city’s average pay of 3,027 yuan.

‘More raises in minimum wages, in small increments each, will better correct this discrepancy,’ he said.

Across from the Guangdong city of Zhuhai, Macau plans to raise public wages, with starting salaries in the civil service rising from 5,500 patacas (S$900 ) to 5,900 patacas.

However, analysts feel that the increase is not enough.

They note that civil service wages still lag behind those in the private sector, which has helped to push Macau’s medium wage level to 6,000 patacas now from about 3,500 patacas 10 years ago.

Fuelled by a boom in the gaming and entertainment sector, housing prices in Macau have as much as doubled over the past two years.

‘Civil servants are not likely to think much about the proposed raise, which means the usual trend of them moving into the private sector should remain strong,’ Macau University professor Eilo Yu told The Straits Times.


Source: The Straits Times 21 Jan 08


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