China Labor Market – Changes and Trends

For most of the past 3 decades, China’s Labor Market was the main driving factors to the country’s economic prowess and rapid development. Back then, the China labor market was characterized with cheap and hardworking labor where local and foreign organizations could reap the benefits. Nowadays, as China inches closer and closer on becoming a developed nation, Chinese labor is not as cheap as it once was...

In a nutshell, Chinese labor has gone from cheap and unskilled to modest and specialized. This has been reflected in the quality of the products manufactured & services in China. A new wave of opportunities (and challenges) are now present for businesses to take advantage of the modern Chinese workforce. But first, it’s important to understand who the new Chinese workers are, what are they good at, and what do they want.

China labor market

With an increase in white-collar workers in the market & an ever-growing digital landscape, more and more skilled employees use online job platforms in China. Hiring in China takes place online and with educated candidates.

If we take a closer look at labor demand, growth in recruitment is mainly seen by new and emerging companies. E-Commerce, banking, finance, insurance, IT are the top-ranked sectors for recruitment demand.

On the other hand, traditional manufacturing in China is witnessing the full blow of automation as more blue-collar factory jobs become redundant. This is coupled with the lack of interest in manufacturing jobs from the new generation of working citizens has resulted in fewer manufacturing jobs and demand in the country as minimum wages and benefits rise. In 2019, Samsung shut down its manufacturing facilities in Huizhou, China and relocated to Vietnam. In 2022, Canon shut down its manufacturing facilities in Zhuhai, also relocating to Vietnam.

China Labor Market Statistics

In the early years of the People’s Republic of China, a strong political government gave importance to agriculture. After opening up and implementing economic reforms during the 1990s, focus was redirected towards the industrial sector and growth soon followed. With the ongoing transformation, the economy is now rebalancing itself towards the service sector, employment in this sector has increased drastically over the past few years.

This led to better salaried jobs in big cities which led to a migration of workers to those cities for a better salary and a better lifestyle. According to Statista’s data, around 288.4 million migrant workers relocated to large Chinese cities in 2018. The increase in demand for qualified and trained workers fueled the urban market. The average salary increased to almost 82K RMB (roughly $15,000) per year in 2018 for citizens in large cities.

Unemployment in China

Unemployment has been a critical issue in China in the past few years with an increase in population and with automation in the industries that led to blue-collar workforce layoffs. This however, has been balanced by the aging industrial worker population and shrinking of this specific workforce.

As per the survey from CNN, almost 80 Million Chinese dealt with unemployment due to COVID-19. Reaching an all time high unemployment rate of 6.20 percent in February of 2020.“The Covid-19 shock to the job market is unprecedented in its scale, length, and nature.” wrote Wei Yao and Michelle Lam in a research report (May 2020). This figure has decreased to 5.5% as of February 2022.

Labor Costs in China

The impact of foreign direct investment (FDI) has also served to up the average wages. Since the Open Door Policy in the 90s, as foreign-funded companies became a major source of demand for migrant workers which led to shortage of labor for domestic companies, forcing wages up.

Since then, labor costs in China have continued to grow. As per the guidelines of the CPC, local governments in China are required to update the minimum wages at least every few years. But they have the flexibility to adjust as per local conditions.

Each province in China set the different minimum wages as per the development level and cost of living in that province. As per the government data currently, it varies from 1200 RMB in small cities like Liaoning and underdeveloped regions, to around 2500 RMB in large T1 cities such as Shanghai, Beijing, Guangzhou, Shenzhen, Nanjing, Hangzhou and several other developed East coastal cities.

With an increase in transitions to automation and innovations, most employees employed by foreign-invested companies earned above the minimum wage. If we compare the other factors like productivity, facilities, infrastructure, logistic cost, China still emerged as a more cost-efficient option compared to other countries with lower labor costs.

For companies and individuals interested inn knowing the total cost of employment in China, including taxes and social benefits, use our salary cost calculator to find out how much an employee costs in different areas of China and which parts by employer and employee.

Job Preferences and Key Trends of the Working Environment

The way we work is to keep on changing. New technologies, innovations, and automation that came into force in the last couple of years have had a significant impact on work. Employee comfort has become a key focus area for businesses, and employees as now demanding more flexibility.

Globalization in the market is affecting the way we work. It has already started influencing the availability of talent pool. Also, it started increasing the pressure to perform. 

The young generation in China is now more university educated and has high career aspirations. They prefer white-collar jobs in different sectors like IT, consulting, e-commerce, education, media, and culture.

Employees of these sectors are feeling distressed as work-life balance is missing due to the 996 work schedule (9 AM to 9 PM, six days week). 

Also, after COVID impact, companies have started deducting the variable components, slowing down the economy.

China Workforce

China has the largest manufacturing workforce in the world and ranked 1st on the list.

The workforce in developing countries is becoming better qualified and to a higher extent engaged in more sophisticated service-oriented activities.

Due to the one-child policy now we are experiencing a decline in the workforce in China as 20% of the country’s population crossed the retirement age.

China has also a unique restraint called the Hukou system which does not allow easy movement of labor across the country.

Residents in rural areas have to fulfill certain parameters to get an urban certificate. Nowadays, China’s second-tier cities are making efforts to attract young talents.

Other than that, China is now facing one more challenge, which is the decline of women’s participation in the workforce. Genders’ gap in pay has increased, leading to discrimination in the labor market.

The decline in childcare facilities has also forced many women to stay home to take care of their kids.

China Labor Policies

China’s labor market has improved over the past decade, but still, regional balance is not there. Labor law exists in China, which gives importance to:

  1. Protection of the legal rights and interests of workers to regulate the labor relations, to establish and safeguard the labor system;
  2. Labor policies that establish an employee representative system. This plays an important role in connecting the company and its management team with employees;
  3. Protection of the rights, personal dignity, right of rest;
  4. Policies that include notice entitlement (30 days notice period), holiday, family-friendly rights like maternity and parental leaves.
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