A Decade of Rising Manufacturing Wages in China

Between the years 2005 and 2016 manufacturing wages in China tripled to US $3.60 per hour.   During those same years, Mexican manufacturing wages dropped from US $2.20 to US $2.10 and Brazilian wages in the manufacturing sector dropped from US $2.90 to US $2.70.  In addition to being more competitive in terms of wages compared to its Asian rival, Mexico is also more competitive than Latin America’s largest economy.

Manufacturing wages in China have soared over the last decade plus.  They now surpass those in countries such as Mexico and China and are rapidly approaching those of Greece and Portugal.  After more than ten years of rapid economic growth, wage packages have tripled among businesses operating in the Chinese manufacturing sector.

Furthermore, It is predicted that, during the next several years, manufacturing wages in China will continue to rise at a steady pace and will soon go beyond those that are paid in what have been traditionally considered middle-income countries.   Due to this process, Mexico will be the preferred alternative for companies that seek to sell their products in North America and in global markets.

In addition to Mexico, Brazil, Greece and Portugal, manufacturing wages in China exceed those of Argentina, Colombia, and Thailand during the same period of 2005 to 2016.  This occurred as China became more integrated into the world economy after its 2001 entry into the World Trade Organization (WTO).  Predominantly, as a result of rising manufacturing wages in China, overall salaries for all sectors increased from US $1.50 in 2005 to US $3.30).  Although wage distribution in China is becoming increasingly unequal, Chinese workers in the manufacturing sector are among the country’s best paid.

Mexico is More Competitive than China

As a result of the significant increase in manufacturing wages in China, Mexico is now more competitive than the Asian country.  This will be the case even if the Chinese yuan experiences significant devaluation because, in addition to its favorability when manufacturing wages in China are considered, Mexico also enjoys other significant advantages over its rival.  One such advantage is that of geography.  While transporting products by ocean may take weeks, delivering products to customers in the US may be only a matter of a day or two.  Additionally, Mexico has built the largest network of free trade agreements in the world.  Products can now be shipped from Mexico on a duty-free basis to forty-four countries worldwide.  Furthermore, Mexico is a safer place for intellectual property.  Mexico has IP laws in place similar to protections provided in the United States.  Finally, in addition to a favorable position vis a vis manufacturing wages, Mexico has also become more price competitive in other areas.  Over the last year, electricity rates for large companies have fallen 24%, while the cost of natural gas for industrial purposes has fallen 27%.  Improved Mexican competitiveness has also resulted in the influx of  Chinese investment into Mexico.