China: rising wages not expected to trigger spike in CPI
• Recent labor shortages and wage increases driven by both temporary and long-term factors
• Labor is no longer cheap, but unit labor cost is stable with the aid of improving labor productivity
• This, along with producers’ weak pricing power, suggests rising wages unlikely to lead to a spike in CPI
China’s labor market has been gradually improving since early 2009, as overall economic growth has rebounded solidly
following the plunge in 4Q08. Since 2H09, the healthy recovery in the private sector, which employs more than
two-thirds of Chinese workers, has begun to contribute more to the strengthening of labor markets. This is particularly
true for export-related industries in coastal areas, as export orders have rebounded, for example, the tech sector. In 4Q09,
labor demand growth in major cities outpaced labor supply growth for the first time since 2Q08. A labor shortage has
reportedly emerged in coastal region and producers have had to hike wages to attract workers.
China: rising wages not expected to trigger spike in CPI [jp morgan research] $FXI
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