Many Reasons Cause China To Bid Farewell To "World Factory".

For the most part of the past ten years, China has been the undisputed "world factory" - importing raw materials and exporting cheap manufactured goods to all parts of the world.

A preliminary study released by AlixPartners, a business consultancy, shows that China's position as the world's lowest cost component manufacturer has been surpassed by India and Mexico during the global economic crisis last year.

Like Japan and Asia's four dragons, China is trying to move towards the high-end value chain as people become richer.

But there are clear signs that wages will rise faster than the speed of technology upgrading in many future companies.

The Chinese government is studying ways to solve China's income gap and regard it as a priority for its 12th Five-Year economic plan. China plans to disclose its 12th Five-Year plan next year.

Official data show that the gap between urban and rural incomes in China reached the highest level since 1978 in modern records, which made the problem urgent.

Meanwhile, a senior official of the all China Federation of trade unions warned last month that the share of labor remuneration in China's gross domestic product (GDP) has declined for 22 consecutive years.

Low wages, poor working conditions and long working hours are causing more and more disputes and workers' riots. The official said, "this poses a severe challenge to China's social stability."

The Communist Party of China believes that the widening income gap is a matter of long-term political survival.

So far this year, the government has taken measures to raise the minimum wage level of most major manufacturing centres.

In March, Guangdong announced that the minimum wage would be raised by 20%.

About 1/3 of China's exports are produced in Guangdong.

In the first quarter, the other 7 provinces and cities, including Jiangsu, Zhejiang and Shanghai, also raised the minimum wage by 10% to 17%.

China's Ministry of human resources and Social Security says 20 other provinces plan to raise the minimum wage this year.

Raising wages is not just to calm public dissatisfaction, but also to ensure that the world's largest manufacturing machine has enough labor force.

Most of the workers in factories in coastal cities of China are from the poorer mainland and western provinces, but in recent years, more and more manufacturers have moved their businesses to the mainland to take advantage of the lower labor costs and tax costs.

At the same time, the improvement of rural welfare, the rising prices of agricultural products and the reduction of rural taxes have also reduced the attractiveness of people going to work in Guangdong or other coastal areas.

The official report said that in February, just after the Chinese New Year holiday, Guangdong's manufacturing core area provided more than 2 million migrant workers' employment opportunities.

In order to attract migrant workers to raise wages and improve working conditions, China is attracting more workers in the far area: more and more Vietnamese workers illegally sneak into factories in southern China, often earning two times as much money as their domestic counterparts.

But even though China's labor costs are rising, the pressure on wage increases is felt throughout Asia, which may not include Japan, which has long struggled against deflationary pressures.

The Vietnamese government recently raised the minimum wage standard for civil servants and employees of state-owned enterprises, which is the second time in a year to raise wages in order to combat inflationary pressures.

In Kampuchea, the clothing industry is facing nearly double the minimum wage to meet the pressure of clothing workers' life.

The garment industry is the main export industry of the country.

Hongkong, Brunei and Malaysia are richer, but the gap between the rich and the poor is even greater. They have not set minimum wage standards at all.

These countries and regions also seem to be setting the minimum wage law, which will make Singapore and Macao a "isolated island" in East Asia's insisting against such legislation.

Wages in East Asia are rising and China is at the cusp of the storm.

Governments hope that this trend will alleviate the widening gap between the rich and the poor, but also worry that this will weaken their competitiveness in a globalized economy.

But although the low-end manufacturing industry may gradually migrate to areas where labor costs are relatively low in the country or in Asia, the already built infrastructure will help businesses move to the high end of the value chain, as in Japan in the six and 70s of last century and the four small dragons in 90s.