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People's Daily Online>>China Business

Labor shortage eases in China's booming east region amid global economic downturn

(Xinhua)

09:18, December 23, 2011

HANGZHOU, Dec. 22 (Xinhua) -- Labor shortage, which usually slams thousands of Chinese small- and medium-sized enterprises (SMEs) by the end of the year, is easing in east China amid world economic woes.

As the gloomy world economy continues to affect China, SMEs in China's eastern coastal region are suffering from a business downturn that is resulting in work reductions or closures.

Wang Yanju's company that manufactures down jackets in Hangzhou, capital of east Zhejiang province, employs about 30 workers. Wang said she did not feel as much pressure from the labor shortage as she has in other years.

"We have received far fewer orders this year as a result of the warm weather as well as the unfavorable economic situation. So we don't need to hire new workers this year," Wang said.

Meanwhile, others have been forced to lay off workers or shut down due to lagging production.

About 20 percent of SMEs in Wenzhou, a manufacturing base famous for its handicraft industry, have declared bankruptcy or partially closed, said Zhou Dewen, director of the city's SME association.

After several years of labor shortages, average wages were hiked about 20 to 30 percent last year.

Combined with a surge in material costs, funding difficulties and a shrinking overseas market, the labor cost increase has dampened the profit margins of SMEs in Wenzhou.

Experts say it is getting more difficult for SMEs to continue attracting laborers by raising wages.

"Most of Zhejiang's labor-intensive enterprises are in the lower-end of the industry chain, which means that their profit margins will be further squeezed, making further wage hikes unlikely," said Zhou Guanxin, director of the Research Institute of Zhejiang Federation of Industry and Commerce.

The traditional means of turning a profit through low labor costs has come to an end in China's coastal regions, said Chen Shida, head of the Zhejiang-based Research Institute of Labor and Social Security.

"This will force SMEs to master core technologies, elevate products' added-value, and move to the upper end of the industry chain in the course of business transformation," Chen said.

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