How Deep Is The Potential Of Pay Raise?

In this process of pformation, the most urgent need to remind is not to promote the pformation itself, but precisely the government's inappropriate measures to promote it.

Coastal enterprises recently triggered by a series of extreme incidents such as suicide and strike.

When viewed from an external perspective, this view also holds that China's domestic demand is of great help to the rebalancing and improvement of the global economic structure in a large economy like China.

In fact, when the United States, Europe and Japan are likely to face years of sluggish growth, many people place their hopes on big emerging economies such as China.

Of course, to trigger this benign cycle, we need to make breakthroughs in a certain link.

At present, the rise in wages seems to have become a common practice.

In the early June, Foxconn, which was beset with suicide by staff jumping, announced a substantial increase in wages to employees.

Chairman Terry Gou said that this is a watershed.

He believes that this pay adjustment tide will come quickly and fiercely, including manufacturing and service industries.

According to some scholars' observation, the salaries of almost all industries in China are growing rapidly.

Whether a boss like Terry Gou or a professor like Professor Bai Zhongen of Tsinghua University believes that this is a very positive change.

Terry Gou, who was not so long ago, obviously felt that he was once again popular. He said at the shareholders meeting of the company: "we have done a little earlier, but we are in line with the trend."

I think we must look at this so-called "one divides into two".

The pformation of any enterprise or even the whole country is fundamentally driven by external challenges.

The reason why market economy is more efficient than planned economy lies in the fact that different market players can feel strong competitive pressure at all times.

Of course, to succeed in pition, we cannot do without the government's favorable policy assistance.

But in terms of the micro level of an enterprise, a certain industry and a certain area, the theory of "forced argument" can not be established.

That is to say, not every company or industry or region can successfully carry this kind of force.

It is very likely that after this round of wage surge, a large number of workers will have to suffer from a period of unemployment before the remuneration increases.

This is the ruthless side of the market economy. The overall efficiency is based on the fact that a large number of market players are mercilessly eliminated every day.

A relatively pessimistic comment points out that if such a pformation is too fast and too strong, it will inevitably lead to some labour intensive industries, such as textiles and toys, which are already at the low end of the industrial chain, such as textiles and toys.

After that, a large number of foreign invested enterprises in mainland China will be pferred to Vietnam, India, Indonesia and even more central Asia and other emerging markets with more competitive advantages.

All this will eventually shake the status of China's "world factory" and make China's economic growth stagnate for a period of time.

The famous international clothing brands Coach and Guess have recently said publicly that they are considering shifting more production to Vietnam, Kampuchea and Laos.

But optimists believe that the probability of such a happening is very small.

Because according to statistics, wage cost in China's labor-intensive manufacturing industry accounts for only 5 - 10%, even if the average salary is doubled, the cost growth resulting from it will have a very limited impact on most enterprises.

As for the problem of industrial pfer and empty shell, they believe that low wages are only one of the advantages of attracting investment.

China's biggest advantage is good infrastructure, complete parts and components supporting market system and vast domestic market.

It is said that some of the first batch of enterprises moving to Vietnam and other places are planning to even move back to China.

The reason is that the vast majority of new developing countries outside China often have very poor infrastructure construction and high pportation costs. In addition, many raw materials and accessories are not available locally, and they still need to import from China and add a lot of extra costs. Moreover, the popularity and service efficiency of these governments are far less than that of the coastal governments in China.

These views seem to be different from each other.

But I am afraid that the real situation is not as simple as most commentators. In the final analysis, we need to carry out specific and detailed quantitative research according to the special circumstances of different regions and industries.

But one thing seems certain. China's economy, which has undergone 30 years of rapid development, is at a turning point.

If our overall productivity growth does not keep up with wage levels, if our economic structure fails to basically complete the pition from labor-intensive to more advanced form before the peak of labor force and population aging, the outlook for China's economy will be very bleak.

In this process of pformation, the most urgent need to remind is not to promote the pformation itself, but precisely the government's inappropriate measures to promote it.

In the final analysis, the pformation of the economic structure is a spontaneous behavior of the market. As long as a market has a good self-regulation mechanism, pformation is a matter of course.

What the government needs to do is to maintain a good order of free market pactions, to dismantle all unreasonable barriers that impede the spontaneous force of the market (such as two yuan in urban and rural areas, industry monopolies, etc.), and to do a good job in the education of the whole society.

Those policies that directly promote industrial upgrading through administrative power will not only be of no help, but will also largely impede the completion of the economic pformation.