Higher pay and stronger yuan slow hiring (2)

Most workers saw their incomes rise by 15.1 percent year-on-year in the first three quarters of this year, the report said.

"The average monthly salary for a worker at our factory has increased by at least 15 percent to more than 3,000 yuan ($481) from the beginning of the year," said Gu Zhongwei, general manager of the Wuxi-based Handa Enterprise Fabric Department.

"In the entire textile industry, nobody is talking about profits now. We are only thinking of making it through our current difficulties.

"There is literally no order. Our former partners are now turning to manufacturers in Vietnam and Cambodia, where they offer salaries of only $60 a month."

Shen Xiangjun, manager of Ningbo Jinfan Toy Co Ltd, agreed that labor costs are much higher in China than in other countries.

"I have investigated the Indian market recently," he said. "It turns out that labor costs there are 70 percent cheaper than in China."

He said the average monthly salary at his company exceeds 3,000 yuan.

"Soaring labor cost and rapidly increasing salaries are partly the results of government policies," said Pu Yonghao, Hong Kong-based regional chief investment officer for Asia Pacific at UBS Wealth Management.

"On the other hand, the profit margins of companies have been greatly impaired, especially in labor-intensive industries such as manufacturing. It is very likely that Chinese companies of this kind will lose their edge."