The supply of low-cost labor, widely considered to be fueling
China's sizzling economy, could start drying up as early as 2010, a
report warns.
One of the biggest reasons for the potential shortage is that
the rural labor force may not be as large as previously thought,
the report, issued by the Chinese Academy of Social Sciences on
Thursday, says.
"China is moving from an era of labor surplus into an era of
labor shortage," the report cautions.
One of the architects of the report, however, said it doesn't
necessarily mean the country will lose the advantage it enjoys in
the international market because of its labor-intensive
products.
Experts believe the turning point, when the new labor force will
fail to meet demand, could be as close as three years. This will
trigger a general increase in wages, the report says.
Rising labor costs will pose the question: how long can China
rely on its "population bonus." Some foreign investors have already
moved their businesses to countries with lower labor costs, Wang
Yiming, deputy director of the Academy of Macroeconomic Research,
under the National Development and Research Commission, wrote in a
column published on Wednesday.
The quality of labor has to be improved and industrial
structures urgently upgraded, he said.
The Ministry of Labor and Social Security has also raised fears
that further appreciation of the yuan will result in millions of
jobs being lost.
"It's still too early to say whether China will lose its
competitive edge as labor costs increase... But it can be said that
the country needs to change its growth mode from relying solely on
one production factor (labor) to advancing production methods,"
said Cai Fang, director of the Institute of Population and Labor
Economics, and the report's leading draftsman.
The number of redundant workers below the age of 40 in rural
areas is only about 52 million in absolute terms, far less than the
estimated 100-150 million, said Cai.
The transformation of the population under the family planning
policy and economic and social development is complete, he said,
and the country has now entered a period of low birth and death
rates, with a very gradual increase in population.
The effect of this will be a gradual labor shortage in the
country.
The recent labor shortage in the Pearl River Delta region, a hub
for labor-intensive industries, is a sign of this trend, said Cai.
"The phenomenon is spreading gradually from coastal areas to
central China or even some provinces that boast huge labor
surpluses," said Cai.
The labor force, however, is and will comprise a large
proportion of the population for a long time, added Cai. In fact,
the labor force will continue growing until 2015, the first year
likely to see "zero increase."
(China Daily May 12, 2007)