BEIJING - The
supply of low-cost labor, widely considered to be
fueling China's sizzling economy, could start
drying up as early as 2010, a report warns.
One of the biggest reasons for the
potential shortage is that the rural labor force
may not be as large as previously thought, says
the report issued by the Chinese Academy of Social
Sciences.
"China is moving from an era of
labor surplus into an era of labor
shortage," the report
cautions.
One of the architects of the
report, however, said it doesn't necessarily mean
the country will lose the advantage it enjoys in
the international market because of its
labor-intensive products.
Experts believe
the turning point, when the new labor force will
fail to meet demand, could be as close as three
years. This will trigger a general increase in
wages, the report says.
Rising labor costs
will pose the question: How long can China rely on
its "population bonus"? Some foreign investors
have already moved their businesses to countries
with lower labor costs, Wang Yiming, deputy
director of the Academy of Macroeconomic Research,
under the National Development and Research
Commission, wrote in a column published last
Wednesday.
The quality of labor has to be
improved and industrial structures urgently
upgraded, he said.
The Ministry of Labor
and Social Security has also raised fears that
further appreciation of the yuan, China's
currency, will result in millions of jobs being
lost.
"It's still too early to say whether
China will lose its competitive edge as labor
costs increase ... But it can be said that the
country needs to change its growth mode from
relying solely on one production factor [labor] to
advancing production methods," said Cai Fang,
director of the Institute of Population and Labor
Economics, and the report's leading author.
The number of redundant workers below the
age of 40 in rural areas is only about 52 million
in absolute terms, far fewer than the estimated
100 million to 150 million, said Cai.
The
transformation of the population under the
"one-child" policy and economic and social
development is complete, he said, and the country
has now entered a period of low birth and death
rates, with a very gradual increase in population.
The effect of this will be a gradual labor
shortage in the country.
The recent labor
shortage in the Pearl River Delta region, a hub
for labor-intensive industries, is a sign of this
trend, said Cai. "The phenomenon is spreading
gradually from coastal areas to central China or
even some provinces that boast huge labor
surpluses."
The labor force, however, will
continue to take up a large proportion of the
population for a long time, added Cai. In fact,
the labor force will continue growing until 2015,
the first year likely to see "zero increase".
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