23 hours ago

Chibi

choosing the good from the, instead of its inefficient. Chairman of China equities at JP Morgan Jing

China's coastal manufacturing hubs have, for many years, been the production base of choice for domestic and multinational companies looking to take advantage of the country's vast pool of inexpensive labour . who want to take advantage of cheap labor, a large number of domestic and foreign enterprises, over the years, China's coastal manufacturing center has been the production base of the last choice. But along with a strengthening renminbi and government action to curb pollution and overcapacity, a surge of labour disputes since May suggests that the low-cost model of production is no longer robust. However, in May this year has significantly increased labor dispute in China , coupled with a stronger renminbi and the government take action to curb pollution and excess capacity, show that the low-cost production model no longer stable. Companies that traditionally relied on China as a source of cheap labour are increasingly relocating low-margin production lines to lower-cost labour venues - particularly in central China, by speeding up factory automation plans and, where possible, by passing on costs to customers. Traditionally, Chinese enterprises as a source of cheap labor, are increasingly low-margin product line to migrate to places where labor costs are lower, especially in inland areas of China, the main means of accelerating the implementation of factory automation, and possible Next, the costs onto consumers. This is evident in the announcement by Foxconn, China's largest manufacturing employer, that it will increase its prices and use more automated production. China's employment in the manufacturing business - Foxconn (Foxconn) announced that it will raise prices and increase production automation level, she demonstrates this. Although the rise in labour costs calls into question China's status as the world's workshop, it can also be seen as a part of the process of moving towards higher value manufacturing and of China becoming a more attractive consumer market. Labor costs while people suspect China, as a "world factory" status, but it can also be regarded as high value-added manufacturing to the transfer of the growing Chinese consumer market appeal of this part of the process. Labour tensions have disrupted operations at a range of big Chinese plants in the past few months, including facilities producing Honda and Toyota vehicles, and more recently at parts suppliers Atsumitec and Omron. In recent months, tensions between labor and management led to many large factories in China discontinued, including the production of Honda (Honda) and Toyota (Toyota) car factory, new suppliers Atsumitec involved and Omron (Omron). Labour costs in China's biggest manufacturing hubs, the Pearl River Delta and the Yangtze River Delta, have risen 20-25 per cent this year, according to official data. Throughout the country, minimum wages have? Risen by 12 per cent on average this year . Official figures show that this year, two major manufacturing center in China, "Pearl River Delta" and the "Yangtze River Delta", labor costs rose by 20% -25%, the average national minimum wage increases 12%. Although in some of these instances, rising labour costs have had a limited impact on profit (given the low proportion of labour costs to cost of goods sold), the greater risk arises from loss of production. In some cases, rising labor costs on Profit limited impact (because of labor costs to sales ratio of less cost), but the greater risk from the work stoppage. As such, we believe management teams will show greater inclination to accommodate worker demands. Wage pressure is not just limited to the manufacturing sector - management at Yum Brands, the largest restaurant operator in China, has indicated that very high labour inflation is expected in the second half of the year. Accordingly, we believe that management will be more willing to adapt to the demands of the workers. Wage pressures are not limited to the manufacturing sector - China's largest restaurant group Yum (Yum Brands)'s management has said it expects the second half of this year, labor costs will rise sharply. Many industries in which labour costs constitute a relatively small component of total costs will be able to weather a significant degree of wage inflation, particularly since cost competitiveness can be preserved by improving labour productivity. Labor costs in the total cost of a relatively small proportion of industry, will afford a more substantial wage increases, not to mention they can improve labor productivity, to maintain cost competitiveness. Investors should also keep in mind that the investable universe of Chinese companies is heavily weighted towards sectors such as financials, telecoms and energy, which are presumably less impacted by wage inflation occurring among the manufacturing workforce (since typical wages already stand far above average levels) . Investors should also remember that the Chinese companies to invest significant emphasis on financial, telecommunications and energy industries in the manufacturing sector wages were up pairs of the impact of these industries will surely Bi Jiao Xiao (Ben Lai wages in these industries on the far Gaoyupingjun level). The situation is more precarious for producers in labour-intensive, low-profit margin industries. By examining average rates of wage growth and the ratio of wages to profit across industries, we find that construction, manufacturing, wholesale and retail are the industries most affected by wage inflation. in the labor-intensive and low margin industry, manufacturers will not stabilize the situation. We analyzed the growth rate of average wages and wage and profit rates, found that the construction, manufacturing, wholesale and retail industries most affected by wage increases. With the influence of policy support, the central region of China has emerged as the alternative manufacturing location of choice, offering ample lower cost labour, improving transportation links and a range of local government incentives. In policy support, in central China has become another excellent manufacturing locations, there are a lot more cheap labor, improving transport facilities, and local government also introduced a number of incentive policies. By and large, the production of higher-value-added goods is likely to remain concentrated in well-established manufacturing hubs to take advantage of better distribution networks, supply chains and access to skilled labour. Generally speaking, the production of high value-added products likely to remain concentrated in the old manufacturing centers to take advantage of better distribution network, supply chain and skilled workers. Demographic factors lie at the root of labour issues. China's labour surplus is waning - the population of workers aged 20-39, the bracket that captures a high proportion of workers in labour-intensive companies - has been declining for several years. Population factors are the root cause of labor problems. In recent years, the phenomenon of surplus labor in China is gradually reduced, between the ages of 20-39 years old labor force (labor-intensive enterprises in a large proportion of employees) continue to decrease. Recovering global demand has revealed a shortage of young migrant workers available or willing to work far from their homes in coastal cities where the costs of living are prohibitive. Another factor behind coastal labour shortages is the wider availability of construction employment in inland China due to stimulus -led infrastructure expansion. gradual recovery in global demand situation, able or willing to leave their homes, to the high cost of living in the coastal city of scary young migrant workers working there for less than. Coastal areas of labor shortage caused by another factor is the economic stimulus caused by the expansion of infrastructure in inland areas to find job opportunities for the construction industry increased significantly. With annual wage growth for unskilled migrant workers likely to outpace wage growth in the next several years, we believe rising incomes should support efforts to rebalance the economy away from excessive reliance on investments and net exports. The next few years, non-technical class wages for migrant workers The annual growth rate is likely to exceed the overall annual growth rate of wages. Therefore, we believe that the continued revenue growth, will help China to rebalance the economy to get rid of investment and net exports of over-reliance. As China's mass labour pool gains higher disposable income, we expect a sizable number of households will cross the income threshold at which the consumption of more diverse food categories, branded clothing, education and entertainment as well as travel services becomes viable. We also believe the process of relocation to central China will generate higher demand for logistics services while the increasing wage pressures will prompt more companies to invest in automation. With China's large labor force increased disposable income, we expect the Chinese to reach a higher level of family income number will be substantial, they will be able to afford to consume more food variety, brand clothing, education and entertainment and tourism services. We also believe that the process of migration to the central logistics push demand higher, but wage pressures continue to increase, will encourage companies to invest in automation. Jing Ulrich is JPMorgan's managing director and chairman, China equities and commodities of this article Jing (Jing Ulrich) is JP Morgan Chase (JPMorgan) Managing Director, Chairman of Securities and Commodities Ministry translator / Yang Yuan