Can Chinese Manufacturing Firms Cope with Rising Labor Costs?

Dramatic increase in real manufacturing wages in China combined with slowing external demand, is putting great pressure on Chinese manufacturing firms. The tight labor market in China led to a high worker turnover rate of 26% in Guangdong from 2015 to 2016, with rates higher for younger workers below age 28 (37%) and migrant workers (30%). Upgrading requires making new capital investments such as in automated equipment or robots, often with government support. To support adjustment to rising labor costs, it is important for China to allow for open market competition and create a level playing field.