Labor Market and Salary Report 2018/19

Expected wage growth to pick up, ending a seven-year downward trend - Results of the 2018 German Chamber Labor Market & Salary Report

Beijing, Shanghai, Guangzhou, 12th September 2018. For the first time since the German Chamber of Commerce in China started measuring salary data among its member companies on a China level, the expected salary growth for the upcoming year has picked up. German companies in China expect to increase wages in 2019 by an average of 5.99%, 0.09 percentage points above last year’s forecast. The survey was carried out between 5th June and 20th July 2018 by the German Chamber of Commerce in China among its member companies, in partnership with Direct HR Group.

Expected wage growth at German companies picks up slightly – a trend mainly driven by the Yangtze River Delta and Guangzhou

The uptick in wage growth developments is not a phenomenon at German companies in China only. Concurrently, China’s national wage increases from 2017 to 2018, minimum wages and regional wage guidelines are moving in the same upward direction. With German companies paying generally higher than average wage levels in China, wage growth at German companies has traditionally been below the major national indicators for wage developments. While German companies expect wages to increase by 5.99% in 2019, 0.09 percentage points (p.p.) above last year’s forecast, Chinese overall national wages increased by 10.0% in 2017, 1.1 percentage points higher than the preceding year.

With China’s transition to a more value-added production-based model, talent for specific industries remains scarce. As a result, China’s wage levels are increasing. It remains to be seen whether the uptick in 2019 will represent a tipping point in the overall diminishing trend in wage growth rates of the past years or whether salary growth will stabilize around the 6% - in the vicinity of China’s annual GDP growth rate. The mild uptick however, is not a China-wide trend, but mainly driven by locations in the Yangtze River Delta, as well as Guangzhou. Shanghai, Suzhou, Taicang, Kunshan and other locations in the Yangtze River Delta, show an expected wage increase of 6.16% in 2019, 0.23 p.p. above last year’s mark. Guangzhou’s expected wage increases for 2019 exceed last year’s expectations by 0.93 p.p., reaching a 6.09% increase, while Shenzhen and other Pearl River Delta areas observe lower wage increases in 2019, compared to what they had reported for 2018, reaching 5.90% (-0.13 p.p.). Locations in the north of China, including Beijing and Tianjin, also record a slowdown with expected wage growth for 2019 amounting to 5.54% (-0.17 p.p.).

Productivity Perceptions remain overall stable

Despite increasing wages levels, German companies see an overall justified correlation with productivity and qualifications. The proportion of companies that consider salaries to be high, taking productivity and qualifications into account, has dropped by 6.9 p.p. to a share of 22%, while the remaining 78% of companies consider wage levels as reasonable or low compared to the productivity and qualifications level. Nevertheless, increasing labor costs remain a major concern, with 85.9% of the companies considering it as having a high or medium impact on business, closely followed by recruiting (85.3%) and retaining (78.1%) qualified staff.

 

The full report will be available free of charge to all members of the German Chamber of Commerce in China. A short version of the survey can be downloaded here.

This report was conducted in partnership with