Labor supply will constrain China's economic growth: Hang Seng

By Kim Young-gyo
HONG KONG, March 10 (Yonhap) -- China's labor supply is expected to increasingly
constrain growth in the word's fastest growing economy, the second largest bank
in Hong Kong said Wednesday.

China's labor shortage will push up wage costs and reduce the competitiveness of
mainland China's exports in overseas markets, warned Bill Leung, senior economist
at Hang Seng Bank.
"Consumer spending in the U.S. may continue to disappoint as consumers remain
concerned about job prospects. This contrasts markedly with the situation in
mainland China where the problem is more of insufficient labor than jobs," Leung
said.
Stressing the labor supply issue is more serious in the coastal cities, he said
that the companies in the Pearl River Delta in southern China are facing labor
shortages, with a demand-supply gap amounting to more than a million. The number
is equivalent to about 2 percent of total employment in Guangdong Province.
"A number of factors lies behind the present labor shortage problem in the
coastal cities," Leung said.
While the export recovery is leading to growing demand for workers, particularly
among the labor intensive, assembly line type of industries, many migrant workers
who traveled home for the long lunar New Year holidays earlier last month have
not returned to the coast as more jobs are now available nearer home, according
to Leung.
"The government's 4 trillion-renminbi measures launched in late 2008, which
focused mainly on infrastructure investment in the inner regions, might have
helped absorb a significant share of rural workers," he explained.
He also said the narrowing of the wage gap between the coastal and the inner
regions could be another factor contributing to the labor shortage in the coastal
areas.
"In mainland China, wages in the coastal cities have always been higher than
those in the inner regions. But faster wage growth in the inner cities in recent
years has rapidly closed the gap between the two regions," he said.
The economist feared the situation is likely to get worse as the labor force
looks set to grow at a much slower pace as the impact of the one-child policy
starts to emerge.
Leung said, however, that the labor shortage could have positive long-term
consequences, such as the narrowing of the income disparity between the rural and
urban areas as well as upgrading of economic structure.
ygkim@yna.co.kr
(END)

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