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Increasing the minimum wage will not affect China's competitiveness, says a signed article in Beijing News. An excerpt follows:

Several provinces and municipalities have raised minimum wage levels recently.

According to the Regulation on Minimum Wage issued by the Ministry of Labor and Social Security in 2004, the standard should be adjusted at least once every two years. Under the current situation, it is of great significance to implement this rule.

First, it will relieve the insufficiency of domestic demand and consumption.

Industrial workers and migrant workers are the groups with high consumption potential and most need to increase their incomes. Low wages have long limited the improvement of their living conditions and enhanced their preference for preventive saving, which greatly affects domestic demand.

It is estimated that if each of the 150 million industrial workers received an increase of 100 yuan (US$12.30) a year, total demand would increase by 90 billion yuan (US$11.11 billion).

Second, it will help improve laborers' quality and promote enterprises' technical upgrades.

For most industrial workers and migrant workers, low wages have led to the decrease of input to their quality and skill improvement. For enterprises, when human resources are abundant and the labour cost is low, they tend to use more labor but not improve the technical levels. To raise the minimum wage levels will help China's industrial sector walk out of a low-level development.

Some people worry that increasing the minimum wage levels will deteriorate China's investment environment and harm the country's international competitiveness.

Actually, compared with India and some other Southeast Asian countries, China's labor cost advantage is lessened or diminished. The labor wage levels in some African countries are even lower.

But according to the World Bank, China's comprehensive investment environment still ranks near the top, higher than that of India and other developing countries. Labor cost is only a small part in overall competitiveness. Foreign investors will not easily abandon China only because workers' wages increase a bit.

(China Daily August 30, 2006)