Labor Shortage in China

Greeting from China.
I’m Mike Bellamy from the CSIC and I’m back with a review of the headlines in the Chinese papers which are relevant for foreign buyers like us.

Labor shortage a headache for factories

It really isn’t anything new to hear the China Daily report that factories in the Pearl River Delta Region are still feeling the pinch from a labor shortage despite having increased the minimum wage level by 15% in these regions during the first 6 months of the year.

In short. This pinch is a good thing in my opinion (and I own a factory).

When I first got to China in the mid 90’s, because the set up costs were low, labor cheap and loans readily availble, it felt like any joker would try their luck at starting a factory.  A lot of the GM’s I met at small factories (many large and some medium ones too!) had no idea what they were doing.  The result was a lot of headaches and a lot of hand holding by me to help them get it right.  Now that the interior of the country is developing and no longer shedding excess labor of to the coastal cities, there factories along the coast need to do two things.

  1. Treat employees better to retain them. That’s a good thing in my opinion.
  2. More importantly, factories can no long rely on the “throw another body at it” production mentality. They actually need to learn proper management and efficiency techniques to stay in business.

There are some professional factories in China a lot of un-professional factories. I am hoping the increased costs of labor, rents, power, taxes, and currency appreciation will cause a great shake out where only the efficient and well managed factories survive. As buyers, this will make our lives so much easier, plus there will still be plenty of factories left after the shake out for healthy competition driving down costs.

Check out my earlier blog posts at if you are interested in related topics such as

China’s manufacturing slowdown. Why it’s GOOD news for us buyers.

What lawn mowing methods tell us about the costs of labor in China

Reports of China’s death as a sourcing destination are highly exaggerated.

BTW, if you are looking to figure out where is the “next China”, I’ll let you in on a secret; there is no next China unless you mean that China is the next China.  In those blogs mention above I explain how the move in low cost production will not take place from China to another country, but rather the move will be from the China coast to China interior. This has some major ramifications for foreign buyers. So get ready, read those blogs post if you want to see what I see in my crystal ball.


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