Labor Market & Salary Report - AdmiralCloud

2018 | 2019

In partnership with

Labor Market & Salary Report

GERMAN CHAMBER OF COMMERCE IN CHINA

www.china.ahk.de/chamber

2018 | 2019


© 2018 by the German Chamber of Commerce in China. Thank you for not reproducing this report either in part or in full

without prior consent of the German Chamber of Commerce in China.

While every effort has been made to provide accurate information in the preparation of this report no responsibility or

liability is accepted for errors or omissions of fact or for any opinions expressed herein. Opinions, projections and estimates

are subject to change without notice. This report is for information purposes only. In no event shall the German Chamber of

Commerce in China, Direct HR Group or their employees be liable for any losses or other consequential, incidental,

exemplary or special damages relating in whole or part to the use of information contained in this report.

Cover picture: Soho Fuxing Square, China. Picture by Daniel Chen on Unsplash

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Labor Market & Salary Report 2018 | 2019

11th Edition

Wage Developments at German Companies

▪ German Chamber companies expect average wage

increases of 5.99% in 2019.

▪ For the first time since the survey is conducted on a China

level, the expected salary growth has not slowed down,

but slightly picked up.

▪ Regional comparison shows that the major contributors to

the uptick in expected wage increases are locations in the

Yangtze River Delta and Guangzhou.

▪ Production workers, junior, mid-level, and senior

professionals are to expect higher wage increases than

last year.

▪ Senior management roles – Deputy GM and CEO/GM –

added to the survey for the first time last year, are the

only ones to expect decreasing wage growth rates at a

China level.

Productivity and HR Environment at GermanCompanies

▪ When asked whether productivity increases will be able

to match wage increases in the future, the sentiment

remains positive, although a little more conservative than

in the previous edition: 14.4% of companies consider it an

unlikely scenario (13.5% last year), while 50.7% consider it

as likely (58.2% last year).

▪ Rising labor costs, recruiting and retaining qualified staff

remain the top three HR related issues.

▪ Supplementary medical insurance (89.8%), annual medical

check-ups (88.6%), and variable bonuses / sales

commissions (85.8%) are the most commonly used

components of variable compensation.

KEY DEVELOPMENTS

Economic Environment

▪ China's GDP grew at 6.8% during the first half of 2018,

0.1 percentage points (p.p.) below the same period last

year, but well within the official annual target of 6.5%.

▪ A stricter financial stance, aiming to enhance financial

stability, has resulted in increased borrowing costs and

weighed on the country’s GDP growth.

▪ With the potential escalation of the ongoing trade conflict

with the US adding pressure on the economy, Chinese

policymakers are softening their stance on deleveraging

(reduction of debt burden).

▪ Consumption continued to add weight to its contribution

to the economy, accounting for 78.5% of economic

expansion in the first six months of 2018.

Labor Market Developments

▪ The urbanization rate in China was 58.5% at the end of

2017, +1.7 p.p. compared to the previous year.

▪ The urbanization rate is interlinked with the granting of

household registrations (hukou), which in turn impacts

migration flows and labor supply. Reforms to the hukou

system remain limited, and larger cities have developed

ways to limit the migrant population.

▪ No advancements on regulations to increase the

retirement age. China’s working age population peaked in

2011 with 925 million and is expected to decrease to 830

million by 2030.

▪ Low migration combined with China’s ageing population

compound to create a shortage of labor available in urban

areas.

National Wage Developments

▪ Wages were back to double digit growth rates in 2017,

with an increase of 10.0% over the previous year.

▪ China’s per capita disposable income grew by 7.3% in real

terms (discounting inflation), reaching an average of RMB

25,974. Urban disposable income grew 6.5%; rural

disposable income grew 7.3%.

▪ Minimum wages in 2018 have increased 11.4%, versus

10.7% last year. However, there are provinces where the

minimum wage increase comes after one or two years

without any variation (e.g. Beijing will update its minimum

wages in September 2018. The last time minimum wages

were updated was in August 2016) .

10.20

8.90 8.80

8.10

7.10

6.235.90 5.99

2012 2013 2014 2015 2016 2017 2018 2019

Wage Growth Development at German Companies in China (%) Nominal growth

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Content

I Labor Market Environment

1. Moderate Growth

2. Business Sentiment & Price Developments

3. Labor Market Structure

4. Labor Market Developments

5. Notes

II Wage Developments in China

1. National Wage Developments

2. Provincial Wage Developments

3. Wages by Industry and Ownership

4. Productivity

5. Notes

III General Survey Results

1. Expected Wage Developments at German Chamber Companies

2. Regional Wage Developments

3. Wage Levels

4. Compensation Levels: Perception

5. Productivity

6. Components of Variable Compensation

7. Wage Determination

8. HR Challenges, Retention & Recruitment

9. Additional HR Data

10. Foreigners

11. About the Survey

12. Profile of Companies and Contributors

13. Notes

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Contribution to GDP by Sector (%)

Quarterly Data, 2014-2018

Contribution to GDP and Growth by Industry (%)

First Semester 2018

I Labor Market Environment

1. Moderate Growth

China’s 2018 second quarter GDP grew at 6.7% year-on-

year (yoy), 0.1 percentage points (p.p.) below the previous

quarter. While the economy experienced a modest

slowdown, the second quarter figure was mostly in line with

market expectations and still above the 6.5% annual growth

target.

Since late 2017, a series of financial regulations have been

put in place to rein in financial risk and reduce shadow

banking activities. The stricter financial stance has resulted in

increased borrowing costs and has weighed on the country’s

GDP growth. Faced with some pressure on the economy

triggered by China’s deleveraging (reduction of debt burden)

campaign and a potential escalation of the ongoing trade

conflict with the US, Chinese policymakers are softening

their stance on deleveraging. The People’s Bank of China

(PBOC) has cut banks’ reserve requirements three times this

year– and another cut has been announced already - to allow

for more liquidity for lenders in the market.

Fixed asset investment – which includes spending on new

homes, factories, roads and ports - grew by 6.0 percent

during the first half of 2018 compared to the same period

last year, a record low. Industrial output growth slumped to

6.0% in June 2018, its lowest pace in the past 24 months.1

China’s retail sales of consumer goods experienced a year-

on-year (yoy) increase of 9.4%, down from 10.4% in the first

half of last year. Final consumption continued to add weight

to its contribution to growth, accounting for 78.5% of

economic expansion for the first half of 2018, versus 58.8%

in the same period last year.

The tertiary industry (mostly services) accounts for more

than half of China’s economy (54.3%) and grew 7.6% yoy,

reaching RMB 22,757.6. billion. The secondary industry

(mostly manufacturing and construction) amounts to RMB

16,929.9 billion, up by 6.1%, while the value added of the

primary industry (mostly agriculture) was RMB 2,208.7 billion,

up by 3.2% yoy.

GDP Growth China (%)

Quarterly Data, 2013-2018

6.86.7

4%

5%

6%

7%

8%

9%

Q1 Q2

2018

Quarter

Year

1 2 3 4

2013

1 2 3 4

2014

1 2 3 4

2015

1 2 3 4

2016

1 2 3 4

2017

PrimarySecondaryTertiary

Source: National Bureau of Statistics China (NBS)

50%

Q1 Q2 Q3 Q4

2014 2015 2016 2017

Q1 Q2

2018

Source: NBS

Growth of Retail Sales, Production and Fixed-asset

Investment (%)

9.0

6.06.0

5%

7%

9%

11%

InvestmentProductionRetail

J/F Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2017 2018

Source: NBS. Retail sales and value-added in industrial production growth rates compared to the same period last year. Fixed-asset investment data is cumulative

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Year-on-year GrowthContribution to GDP

J/F Mar Apr May Jun

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Source: NBS

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2.31.6 1.2

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MA

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MA

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Price Level Development 2015-2018 (%)

Variation over the Same Month in the Previous Year

Breakdown of Consumer Price Developments

Average Variations (%) from January to June 2018

2. Business Sentiment & Price Developments

China’s Caixin/Markit Purchasing Managers Index (PMI),

which focuses on small and medium-sized enterprises, stood

at 51.0 in June 2018, slightly below the 51.1 in May (a PMI

above 50 points indicates expansion, below 50 signals

contraction). China’s official manufacturing PMI – which

focuses mostly on state-owned companies – also fell from

51.9 in May to 51.5 in June. However, both figures still yield

a PMI that is above 50, signaling overall expansion in

manufacturing activity.2

The slight decreases might be attributed to a growing

concern on trade tensions between the US and China and its

impact on domestic and external demand. According to

Reuters, a reading on new export orders showed a

contraction standing at 48.4 PMI points, representing the

fourth consecutive month of declining orders.

Confidence in the services sector expanded slightly in June

with a Caixin services PMI at 53.9 and an official NBS

services PMI at 55 points, with companies accelerating hiring.

With the services sector accounting for more than half of the

country’s economy and the government’s emphasis in

reducing industrial overcapacity and upgrading its industrial

base with factory automation, solid business prospects in the

services sector are key to generate new jobs.3

The producer price index (PPI) rose 4.7% in June from a year

earlier, accelerating from the previous month’s increase of

4.1%, the highest in six months, according to data from the

National Bureau of Statistics (NBS). Producer prices are likely

to go down in the second half of the year if factory output

loses momentum as the evolution of the manufacturing PMI

seems to suggest.4

China’s annual consumer price index (CPI) inflation rate rose

1.9% yoy in June. The major components within the CPI that

are putting more pressure on price increases are healthcare,

housing and education. The target on consumer inflation is

set at around 3% for 2018, the same as for 2017, although

most likely the year will close in the range of 1.8%-2.2%.

However, amidst potential price pressure from American

imported goods that are hit by higher Chinese tariffs, price

developments are being closely watched.

Business Sentiment 2018

Purchasing Managers’ Index (PMI)

54.754.2

52.352.9 52.9

53.9

51.5 51.651.0 51.1 51.1 51.0

JAN FEB MAR APR MAY JUN

Producer pricesConsumer prices

Source: Caixin / Markit. PMI values >50 indicate expanding business; values <50 indicate contraction

Source: NBS

ManufacturingServices

Source: NBS

2015 2017

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Secondary PrimaryTertiary

Distribution of Workforce Across Sectors (%)

China’s Age Demographic Composition of Population (%)

Source: NBS; *2018 & 2020: Forecast from World Bank

Source: NBS

22.9 20.3 16.6 16.6 17.6 17.5

70.1 72.0 74.5 72.5 71.2 70.4

7.0 7.7 8.9 10.9 11.2 12.2

Aged 0 to 14 yearsAged 15 to 64 years>65 years

2000 2005 2010 2016 2020*

33.2 34.1 34.6 35.7 36.1 38.5 40.6 42.4 43.5 44.9

27.2 27.8 28.7 29.5 30.3 30.1 29.9 29.3 28.8 28.1

39.6 38.1 36.7 34.8 33.6 31.4 29.5 28.3 27.7 27.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Distribution of Urban & Rural Population in China (%)

Source: NBS. *2017: Xinhua News based also on data from the NBS

48.3 49.9 51.3 52.6 53.7 54.8 56.1 57.3 58.5

51.7 50.1 48.7 47.4 46.3 45.2 43.9 42.7 41.5

2009 2010 2011 2012 2013 2014 2015 2016 2017*

RuralUrban

China’s aging population not only puts pressure on China’s

labor supply but also on its pension system. The current

system can only operate with large fiscal subsidies, since the

pension contributions do not cover retiree benefits.13 In

2016, pension expenses reached RMB 2.58 trillion, whereas

contributions were RMB 2.15 trillion.

In 2017, the pension fund expenditure had increased by

106% compared to 2013. Incoming funds had only increased

by 91% during the same period, thanks to the contribution of

fiscal subsidies which had increased by 165%. The reasons

behind this deficit are, among others, the increase in the

3. Labor Market Structure

By the end of 2017, the urban resident population in China

totaled 813.5 million, 58.5% of the country’s total.5 Since

2011 more than half of China’s population lives in urban

dwellings. To put those numbers in context: in 2000 only

36.2% of China’s population was living in urban areas.6

Growing at the current pace, the urban population could

reach 61% by 2020 which is above the 60% target

established by the 13th Five Year Plan (FYP).

China’s current urbanization rate is 2.5% higher than the

world’s average, however, it is still far from rates in

developed countries (about 80%). In China, only three

provinces / municipalities are above that percentage:

Shanghai (87.9%), Beijing (86.5%), and Tianjin (82.9%).

Closely intertwined with the urbanization rate is the granting

of household registration (hukou) in urban areas. Ultimately,

urbanization is a way to drive more economic growth. As

means of rebalancing the economy and steer consumption,

the Chinese government has pledged to give urban residency

to 100 million migrant workers by 2020.7 However, reforms

to the hukou system remain limited: the places where people

want to go are prosperous urban centers, big cities that one

way or the other have engineered ways to remain off-limits

for prospective migrant population (i.e., Beijing, Shanghai or

Shenzhen have introduced a points system that acts as a

barrier of entry due to the criteria established to qualify for

it: work experience, education level, tax payments).8 A look

at Shanghai’s and Beijing’s urban planning already points

indirectly to these non-inclusive migrant policies, with goals

such as limiting land available for construction as well as the

reduction of population density.9

As long as the reform of the hukou system remains limited,

migration flows will stay flat. Low migration combined with

China’s ageing population compound to create a shortage of

labor available in urban areas. China’s working age

population peaked in 2011 with 925 million; it was 911

million in 2015 and it is expected to decrease to 830 million

by 2030.10

Despite all the talks about increasing the retirement age, no

progress has been made yet. China’s average retirement age

is 54 years, whereas its average life expectancy is 78 years.11

The Chinese Academy of Social Sciences – the government’s

top think tank - issued in December 2015 a paper

recommending that in three years time (December 2018) the

female retirement age should be delayed one year every

three years and male retirement to be delayed one year

every six years, resulting in men and women both retiring at

the age of 65 by 2045.12 Also in the 13th Five Year Plan, it

was mentioned that policies to raise the retirement age are

needed. However, no specific targets were set.

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3.9

2.4

1.9

1.31.5 1.7

3.0

1.71.3 0.4 0.3

1.5

5.4

3.6

2.8 2.7

3.4

2.0

2012 2013 2014 2015 2016 2017

Source: NBS. Outside province: Working in a province other than their household registration; Inside province: Working in the same province of their household registration

Inside provinceOutside provinceTotal

West27.3

East36.4

Central33.0

Northeast3.3

Source: NBS

0.3

1.8

3.1 3.3

2017Growth over 2016 (in %)

Migrant Workers Distribution of Employment by Sector

of Economy 2013 -2017 (%)

Migrant Worker Distribution and Evolution (%)

By Region in 2017 and Evolution Versus 2016

Source: NBS. Starting from 2016 the Northeast region was added into the official reporting

Secondary PrimaryTertiary

42.6 42.9 44.5 46.7 48.0

56.8 56.6 55.1 52.9 51.5

0.6 0.50.4

0.4 0.5

2013 2014 2015 2016 2017

number of pensioners, 14 years of continuous growth in the

basic pension provided by the government (5% increase in

2018), and a conservative management of the retirement

funds. The National Social Security Fund (NSSF), although

not a part of the pension system, is important to it since its

role is to build up capital that covers pension deficits. The

NSSF’s investment policy is determined by the government,

which sets limits on the relative proportions each type of

asset (government bonds, corporate bonds, shares and

mutual funds, oversees investments, etc.) is allowed to take

in the fund’s portfolio. Although the fund will continue to

remain cautious, it is likely to pursue an increase of its

overseas portfolio looking for higher returns.14

Additionally, another resource to ease pressure on the

pension system is the opening of regulations to allow for

commercial insurance plans. In May of this year, a pilot was

launched in Shanghai, Fujian province, and Suzhou Industrial

Park to test a tax-deferred pension insurance project –

where individuals defer tax on their income if that is used to

buy commercial pension insurances.15

Migrant Workers

According to data provided by the National Bureau of

Statistics the number of migrant workers increased by 1.7%

in 2017, totaling 286.5 million.16 2017 was the second year

in a row since 2010 where the growth rate of migrant

workers accelerated, 0.2 percentage points above the

growth rate of 2016. However, 2017’s increase has been

triggered by an increase of outside province migrant workers,

growing at 1.5% in 2017, versus just 0.3% in 2016. This

increase of 1.2 percentage points comes almost entirely at

the expense of inside province migrant population, which

decreased 1.4 percentage points, from 3.4% in 2016 to 2.0%

in 2017.

Eastern and central regions17 concentrate nearly 70% of the

migrant working population in China, but there is barely any

growth in eastern China (0.3%) and moderate growth in the

central region (1.8%). Western and northeast China regions

both grew at around 3%.18

The proportion of migrant workers employed in

manufacturing and construction continues to decline. Slowly

but steadily, migrant workers are shifting from the secondary

to the tertiary sector. In 2013, the proportion of migrant

workers employed in the tertiary (service) sector was 42.6%;

in 2017 it had grown to 48.0%. Within the tertiary sector,

migrant workers are mostly employed in retail, other services

and real state. When it comes to occupation, the fastest

growing is “other services” – a place-holder that includes a

wide range of services, from high-end services such

education or healthcare to services to households - followed

by retail and real estate. However, in the tertiary sector

0

Growth Rate of Migrant Workers (%)

Migrant Workers Distribution 2017

In millions

Migrant workers

Local migrant workers Migrant workers going outside

114.67

Inner-province

95.10

Inter-province

76.75

Source: NBS

286.52

171.85

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-0.1

-1.8

-1.7

0.6

3

Migrant Workers Distribution of Employment by

Industry in 2017 (%)

Source: NBS. No data provided for “other services”

3,2

33

3,6

87

2,8

39

3,7

75

2,8

72

2,8

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3,2

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2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2000

4000

Manufacturing & Mining

Construction Retail Transportation Hospitality Real estate ALL

transportation – which only accounts for 6.6% of migrant

workers’ occupation, offers the highest income.

Following the same trend as the overall labor market, the

migrant worker population is aging. Currently, 21.3% is 50

years old or more, whereas in 2013 that proportion was

15.2%.

Throughout the years, the education level of migrant

workers has improved: even though nearly 60% obtained

only junior high school education, there has been an increase

of those who have reached senior middle school and tertiary

education levels.

Growth year-on-year (%)Income 2017Income 2016

Age Composition of Migrant Workers, 2013 -2017 (%)

Source: NBS

35.5 33.7 32.9 31.9 29.9

49.3 49.2 49.2 49 48.8

15.2 17.1 17.9 19.1 21.3

2013 2014 2015 2016 2017

Aged 16 to 30 yearsAged 31 to 50 years>50 years

Tertiary10.3

No Schooling1.0

Elementary School13.0

Junior High School58.6

Senior Middle School17.1

Migrant Workers Distribution by Education in 2017 (%)

and comparison with 2014 (percentage points - pp)

Variation over 2014 (in pp)

Source: NBS

No Schooling

Tertiary

29.9

18.9

12.3

6.6 6.2

11.3 11.6

Manufacturing & Mining

Construction Retail Transportation Hospitality Real estate

Other services

Tertiary Secondary

Migrant Workers Monthly Income (in RMB)

Source: NBS. Agriculture (0.5%) and other secondary industries (2.7%) not included in the graphic

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Ratio of Job Vacancies to Job Seekers*

Overall China and by Region 2017 Q1 vs. 2018 Q1

Source: China Ministry of Human Resources (MOHRSS) based on the tracking of 95 cities. *A value above 1 indicates labor shortages (demand greater than supply); below means oversupply

6.3 6.6 6.8 7.0 7.3 7.5 7.7 7.9 8.2

11.7 12.2 12.7 13.1 13.2 13.1 13.1 13.5

7.5

2010 2011 2012 2013 2014 2015 2016 2017 2018*

Source: NBS & Xinhuanet.com. * Jobs created in the first semester of 2018; Expected college graduates at the end of the year

New college graduatesNew urban jobs

1.13

1.08

1.161.20

1.23 1.22 1.231.27

China East Central West

2018Q12017Q1

New Urban Jobs and College Graduates 2010-2018

In Millions

4. Labor Market Developments

China’s Ministry of Human Resources (MOHRSS) publishes

quarterly ratios of job vacancies to job seekers by sampling

market supply and demand data from public employment

service institutions in a pool of cities. The total number of

cities varies slightly every quarter. At the time of writing, the

latest data available was from the first quarter of 2018,

covering a total of 95 cities.19

According to the MOHRSS, in Q1 2018 there were 4.67

million job seekers, and 5.75 million job vacancies, leading to

a ratio of job vacancies to job seekers of 1.23, signaling labor

shortages. Compared to the first quarter of 2017 job

vacancies increased by 4.5%, while the number of job seekers

decreased by 4.1%. At regional level the situation is fairly

similar, with all regions across the range presenting labor

shortages. The job vacancies to job seekers ratio for East,

Central and Western China were 1.22, 1.23, and 1.27

respectively.

A glimpse into the aggregated data for the past three years

shows a growing gap between the number of job vacancies

and the number of job seekers. The gap tends to be

temporarily reduced in the second quarter of any given year.

One possible explanation could be an increase in job seekers

after the Chinese New Year, when yearly bonuses have been

collected and employees are more likely to quit their jobs.

However, this hypothesis is only valid for 2015. In 2016 Q2

and 2017 Q2 there was actually a decrease in the number of

vacancies that was more pronounced than the decrease in

the number of job seekers.

China’s unemployment rate in March 2018 was 3.89%,

practically at the same level as December 2017, 3.90%

(unemployment rates are reported quarterly by the Ministry

of Human Resources and Social Security). These percentages

are below the ones released in 2018 by the National Bureau

of Statistics, based on a survey-based urban unemployment

rate, with unemployment rates at 5.0%, 5.0% and 5.1% for

January, February, and March 2018 respectively.20 Data from

the NBS is considered to be more reliable than the one from

MOHRSS, as the former is elaborated according international

standards by the International Labor Organization (ILO).21

In the first half of 2018, 7.52 million urban jobs were created,

while the minimum target for this year is 11 million.22 In 2018,

8.2 million graduates are expected to enter the labor market,

a 3.8% increase over last year.

Source: China Ministry of Human Resources (MOHRSS) based on the tracking of 95 cities. *A value above 1 indicates labor shortages (demand greater than supply); below means oversupply

1.12

1.061.09 1.1

1.071.05

1.11.13 1.13

1.11

1.16

1.22 1.23

2015Q1

Q2 Q3 Q4 2016Q1

Q2 Q3 Q4 2017Q1

Q2 Q3 Q4 2018Q1

Ratio of Job Vacancies to Job Seekers

Overall China 2015Q1 to 2018Q1

0

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5. Notes

1. “China's second-quarter GDP growth softens as trade row stirs

concerns on outlook”. Reuters. 16th July 2018.

https://www.reuters.com/article/us-china-economy-

gdp/chinas-second-quarter-gdp-growth-softens-as-trade-row-

stirs-concerns-on-outlook-idUSKBN1K603L

2. “A closely watched private index on Chinese manufacturing

slips, as expected”. CNBC. 1st July 2018

https://www.cnbc.com/2018/ 07/02/caixin-china-pmi-june-

manufacturing-purchasing-managers-index.html

3. “China services sector expands at steady clip in May but new

orders wobble: Caixin PMI”. Reuters. 5th June 2018.

https://www.reuters.com/article/us-china-economy-pmi-

servies-caixin/china-services-sector-expands-at-steady-clip-in-

may-but-new-orders-wobble-caixin-pmi-idUSKCN1J107O

4. “China Factory Inflation Accelerates as Commodity Prices Edge

Up”. Bloomberg News. 10th July 2018.

https://www.bloomberg.com/news/articles/2018-07-

10/china-factory-inflation-accelerates-as-commodity-prices-

edge-up

6. “China’s Urbanization Rate rose to 58.52%”. Xinhua News. 4th

February 2018. http://www.gov.cn/xinwen/2018-

02/04/Content _5263778.htm (in Chinese)

7. China adopted international standards to measure urbanization

rate in 1981.

8. “China’s Hukou Reforms and the Urbanization Challenge”. The

Diplomat. 22nd February 2017. https://thediplomat.com/

2017/02/chinas-hukou-reforms-and-the-urbanization-

challenge/

9. See 7.

10. Shanghai's urban general planning for 2017 - 2035 sets a target

of 25 million residents by 2035, and a total construction land

area of 3200 km2 (currently at 3071 km2). Shanghai’s full urban

general plan available at: http://www.shanghai.gov.cn/

newshanghai/xxgkfj/2035002.pdf (in Chinese). Main targets in

pages 8 - 10.

Beijing’s urban general planning for 2016 – 2035 proposes

restricting construction land to 3720 km2 by 2020, and to 3670

km2 by 2035; and to reduce population density from 14

thousand/ km2 to 12 thousand/km2. Full report available at:

http://zhengwu.beijing.gov.cn/gh/dt/t1494703.htm (in Chinese)

11. “Delaying retirement, does it affect employment?” MOHRSS

Press Release, 26th July 2016. http://www.mohrss.gov.cn/

SYrlzyhshbzb/dongtaixinwen/buneiyaowen/201607/t201607

26_244222.html (in Chinese)

12. See 10

13. Full paper available here, in Chinese:

1. http://nisd.cssn.cn/shgzyzc/shgzyzc_shbz/201512/t20151209

_2775874.shtml

14. “China’s ageing population is creating a new debt crisis for

Beijing as pension shortfall widens”, South China Morning Post.

6th February 2018. https://www.scmp.com/news/china/

economy/article/2132236/chinas-ageing-population-creating-

new-debt-crisis-beijing-pension

15. “China’s pension fund has US$317 billion up its sleeve ... and

now it’s shopping for overseas investments”. SCMP. 22nd

October 2017. https://www.scmp.com/news/

china/economy/article/2116388/chinas-pension-fund-has-

us317-billion-its-sleeve-and-now-its

16. “Pension accounts to see big changes”. China Daily. 13th April

2018. http://www.chinadaily.com.cn/a/201804/13

/WS5ad05b1ea3105cdcf6518273.html

17. China has two types of hukou: agricultural and non-agricultural.

Migrant workers (农民工) are workers whose hukou remains in

the country side but have been working in a non-agriculture

activity for more than 6 months.

The NBS distinguishes between “Local Migrant Workers” 本地农

民工and “Migrant Workers who go out”外出农民工 . Local

migrant workers are working within the villages and towns

where their hukou is; migrant workers who go out work outside

of the villages and towns where their hukou is, either inside or

outside the province of their hukou.

The direct translation of ‘农民工’is ‘peasant workers’, referring

to people who have agriculture hukou but working in secondary

or tertiary related activities. However, since rural areas seldom

provide non-agricultural jobs, Chinese media uses ‘农民工’ to

specifically refer to ‘peasant workers’ who ‘migrate’ to city areas

and do non-agricultural work.

A local migrant worker 本地农民工 indeed does not migrate.

Consider a Shanghainese holding a Shanghainese hukou that

happens to be an agricultural hukou (even Shanghai has rural

areas). He/she will be considered as a local migrant worker if

he/she is doing non-agricultural work in Shanghai (i.e., driving a

cab).

18. According to the NBS, Eastern region includes Beijing, Tianjin,

Hebei, Shanghai, Jiangsu, Zhejian, Fujian, Shandong, Guandong

and Hainan; Central: Shanxi, Anhui, Jianxi, Henan, Hubei;

Wester: Inner Mongolia, Guangxi, Chongqing, Sichuan, Guizhou,

Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia and Xinjiang;

Northeast: Liaoning, Jilin, and Heilongjiang

19. “2017 Migrant Workers Monitoring Survey Report”. NBS. 27th

April 2018. http://www.stats.gov.cn/tjsj/

zxfb/201804/t20180427_1596389.html

20. Analysis of market supply and demand of public employment

service institutions, by the MOHRS. http://www.mohrss.

gov.cn/ SYrlzyhshbzb/zwgk/szrs/sjfx/ (in Chinese)

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21. NBS Press Release. 17th April 2018.

http://www.stats.gov.cn/english/PressRelease/201804/t2018

0417_1594338.html

22. “China Finally Introducing a Globally Comparable Jobless Rate.”

Bloomberg News. 7th March 2018.

https://www.bloomberg.com/news/articles/2018-03-

07/china-will-finally-introduce-a-globally-comparable-jobless-

rate

23. “Economic Watch: The secret behind China's job creation

success”. Xinhua. 26th July 2018. http://www.xinhuanet.com/

english/2018-07/26/c_137350120.htm

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Wage Growth Indicators China (%)

2012-2018. Nominal Growth

9.6 9.210.4

9.37.7 7.7 7.4 6.9 6.7 6.9 6.6

16.9

11.613.3 14.4

11.9

10.1 9.5 10.18.9

10.0 10.1

2008 09 2010 11 12 13 14 2015 16 2017 2018*

GDP and Wage Growth (%)

2008-2018

Wage growth (nominal)GDP growth

Source: NBS & German Chamber of Commerce in China analysis. *National wage growth estimate. The number of provinces issuing adjustments for wage guidelines & minimum wages varies every year

11.9

10.1 9.5 10.18.9 10.0 10.1

14.0

13.6

11.610.2

8.57.8

7.8

20.2

17.0

13.112.4 12.8

10.711.4

2012 2013 2014 2015 2016 2017 2018*

Source: NBS & German Chamber of Commerce in China analysis. *2018 GDP growth: IMF forecast. 2018 Wage growth: Estimates from the Chamber’s own analysis

Minimum wageNational wageWage guidelines

Average Wage and Wage Growth

2008-2018

Wage growth, nominal (in %) Average wage RMB

28

,89

8

41

,79

9

74

,31

8

81

,80

4

0%

4%

8%

12%

16%

20%

24%

0

15,000

30,000

45,000

60,000

75,000

90,000

2008 09 2010 11 12 13 14 2015 16 17 2018*

Source: NBS & German Chamber of Commerce in China analysis. * Average wage and wage growth: Estimates from the Chamber’s own analysis. Note: Annual wages based on 12 months; all wages are pre-tax

II Wage Developments in China

1. National Wage Developments

According to data from the National Bureau of Statistics

(NBS) 2017, wages returned to double digit-growth, with a

nominal increase of 10.0% yoy. The average wage was RMB

74,318 in 2017, versus RMB 67,569 in the previous year.

Since 2011, when salaries rose 14.4%, the pace at which

salaries grew declined steadily until dropping to a growth

rate of 9.5% in 2014. From 2015 onward, salary growth

rates have been swinging between double-digit growth rates

(10.1% and 10.0%, in 2015 and 2017 respectively) and

single-digit growth (2016, 8.9%).1

When China joined the World Trade Organization (WTO) in

2002, it increased the global labor supply, but in recent years

China’s oversupply has dried up. With the country’s

transition to a more value-added production based model,

talent for specific industries remain scarce. As a result,

China’s wage levels are accelerating and in certain provinces

are nearing those of some European regions. China’s labor

force, after years of catching up, is finally “getting paid”. This

results in upward pressure on productivity, and opens the

door to the relocation of certain activities to countries with

lower labor costs.2

Following on this year’s wage growth, per capita disposable

income rose as well: 7.3% in real terms (i.e. discounting

inflation) - 1 percentage point above 2016’s growth rate – to

hit RMB 25,974. Urban disposable income rose to RMB

36,396 (up RMB 2,780 or 6.5% in real terms from 2016);

rural disposable income reached RMB 13,432 (RMB 1,069

more than in 2016, a 7.3% increase in real terms).3

What about income distribution? China’s Gini coefficient in

2016 was at 0.47,4 slightly above 2015’s 0.46. In January

this year Ning Jizhe, head of the NBS, dubbed income

inequality “relatively serious”.5 As a part of the efforts to

address inequality, China is planning to reduce its income tax

to boost consumption and reduce disparities.6 The new tax

regulation intends to raise the threshold above which an

individual is subject to income tax. Currently, workers with

wages below RMB 3,500/month are exempt. The new

regulation wants to extend this threshold to RMB

5,000/month.7 It also increases the lower and upper bounds

of the three lowest tax brackets (3%, 10%, and 20%). The

final version of the new income tax regulation is to become

effective in October this year.8

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Source: NBS & German Chamber of Commerce in China analysis.* 2018 Regional wage developments estimates

13.3

14.4

11.9

10.1 9.5 10.18.9

10.0 10.1

0%

4%

8%

12%

16%

2010 2011 2012 2013 2014 2015 2016 2017 2018*

2. Provincial Wage Developments

At the time of writing, no official data was available for 2017

urban wage developments at provincial level. Only overall

regional salaries (West, Central, East, and Northeast) were

released in a NBS press communiqué in May.9

Central regions in China (Anhui, Henan, Hubei, Jiangxi,

Shanxi, etc.) present the highest wage increase in 2017:

10.7% growth, for an average annual salary of RMB 61,193 –

the second lowest at the regional level, after the Northeast

region.

Following central regions, the second highest wage increase

is in the most developed coastal provinces in the East with a

10.1% yoy increase in 2017. The average annual salary in

East China is RMB 84,809, mostly influenced by the high

compensation levels in Shanghai and Beijing.

Liaoning, Jilin and Heilongjiang provinces constitute what the

NBS refers to as Northeast China. Combined, they present

the most moderate wage increase in 2017: 8.5%. Still, that is

1 percentage point above 2016. Northeast China currently

holds the lowest annual average salary among the four

regions, with RMB 59,514.

Using the annual East average salary – the highest among

the four regions - as the baseline for comparisons, since

2010 the only region that has managed to reduce its relative

gap with the east has been western China, and only by a few

points. If in 2010 compensation levels in the west were 0.79

times those of east China, 8 years later they are 0.81 times.

Since there is no official provincial salary data for 2017

available yet, we have used estimates for 2017 and 2018

wage increases, considering the average wage growth of

previous years as well as projections of provincial GDP

growth rates and inflation.

The province that caught our attention the most was Tibet

that in 2015 presented a wage increase of 59.8% versus

2014: rising from RMB 61,235 to RMB 97,849. That year, in

commemoration of the 50th anniversary establishment of the

Tibet Autonomous Region, the central government

transferred RMB 132.09 billion to the region (higher than the

actual GDP of Tibet that year). Many of the transferred

payments were added directly to average wages, in the form

of subsidies or aid to ethnic minorities. With Tibet’s fairly

small population base (3.3 million) the subsidies translated

into a significant boost in the average wage.10

Setting aside the particular case Tibet represents, when

looking at the aggregate average wage development at

province level for the period 2013-2018 it is worth to note

that Shanghai or Zhejiang provinces present higher growth

rates than China’s overall average, despite both being in the

Wage Growth by Region (%)

2010-2018. Nominal Growth

Central, North East and West China Compensation

As factor of East China’s Compensation 2010 -2017

Source: NBS & German Chamber of Commerce in China analysis

West Central East=1Northeast

0.7

9

0.7

7

0.7

9

0.8

0

0.8

0

0.8

1

0.8

1

0.8

1

0.7

2

0.7

4

0.7

5

0.7

3

0.7

3

0.7

2

0.7

2

0.7

2

0.7

0

0.7

2

0.7

3

0.7

4

0.7

2

0.7

2

0.7

1

0.7

0

2010 2011 2012 2013 2014 2015 2016 2017

West Central East ChinaNortheast

Average Regional Wage Developments (%)

2013-2018

Source: NBS & German Chamber of Commerce in China analysis. According to data from the NBS

salary growth in Tibet in 2015 was 59.8%, due to an extraordinary one-time effect (see text), resulting

in the region topping the ranking of regional wage developments

12.8

12.5

12.2

11.6

11.6

11.0

10.7

10.7

10.7

10.6

10.4

10.3

10.2

10.0

10.0

9.9

9.8

9.7

9.6

9.4

9.3

9.2

9.1

9.0

8.8

8.6

7.7

7.7

7.6

7.4

5.5

Tibet

Guizhou

Yunnan

Guangxi

Hainan

Gansu

Sichuan

Shanghai

Hubei

Hunan

Shandong

Chongqing

Jiangxi

Jilin

Heilongjiang

Zhejiang

Xinjiang

CHINA

Guangdong

Qinghai

Hebei

Beijing

Jiangsu

Fujian

Tianjin

Shaanxi

Ningxia

Liaoning

Anhui

Henan

Inner Mongolia

Shanxi

19.7

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Provincial Wage Levels

2016-2018. Average Monthly Wages, in RMB

Regional Wage Increase Guidelines 2018 (%)

Province Minimum Average Maximum

Shanghai* 3.0 8.0 -

Tianjin 3.0 7.5 12.0

Shanxi 4.0 8.5 12.5

Inner Mongolia 1.5 7.0 10.0

Jilin 3.0 6.0 10.0

Fujian 3.0 8.0 12.0

Jiangxi* 3.0 8.0 -

Shandong 3.0 7.0 11.0

Henan 3.0 12.0 16.0

Hainan 3.4 7.1 8.9

Sichuan 3.0 7.0 11.0

Shaanxi 3.0 7.5 12.0

Average 3.0 7.8 11.5

Average 2017** 3.0 7.8 12.2

Average 2016 3.3 8.5 13.1

Source: German Chamber of Commerce in China research and analysis. Annual averages for each tranche

are calculated on the basis of regional adjustments identified during the year. Data as of August 3rd, 2018.

*No maximum increase guideline issued for Shanghai and Jiangxi. ** The 2017 average includes all 23

provinces that issued new guidelines that year, most of them (19) in the second semester and therefore

differ from the averages presented in last year’s report, where only 4 provinces were considered

Province 2016 2017* 2018* Factor**

Shanghai 9,995 10,967 12,035 1.77

Beijing 9,994 10,965 12,030 1.76

Tibet 8,603 10,109 11,879 1.74

Tianjin 7,192 7,852 8,573 1.26

Zhejiang 6,111 6,733 7,419 1.09

Guangdong 6,027 6,627 7,286 1.07

Jiangsu 5,965 6,532 7,153 1.05

Guizhou 5,523 6,237 7,044 1.03

Qinghai 5,549 6,104 6,715 0.99

Chongqing 5,462 6,047 6,695 0.98

Sichuan 5,327 5,933 6,608 0.97

Xinjiang 5,312 5,886 6,523 0.96

Ningxia 5,464 5,954 6,488 0.95

Shandong 5,212 5,770 6,387 0.94

Hainan 5,139 5,717 6,361 0.93

Yunnan 5,038 5,653 6,344 0.93

Fujian 5,164 5,680 6,246 0.92

Hubei 4,986 5,516 6,102 0.90

Gansu 4,798 5,395 6,066 0.89

Guangxi 4,823 5,397 6,040 0.89

Hunan 4,853 5,387 5,979 0.88

Inner Mongolia

5,089 5,509 5,965 0.88

Shaanxi 4,970 5,435 5,945 0.87

Anhui 4,925 5,344 5,798 0.85

Jiangxi 4,678 5,196 5,772 0.85

Jilin 4,675 5,180 5,740 0.84

Hebei 4,611 5,045 5,520 0.81

Liaoning 4,668 5,041 5,444 0.80

Heilongjiang 4,370 4,847 5,376 0.79

Shanxi 4,475 4,768 5,079 0.75

Henan 4,125 4,459 4,819 0.71

Source: German Chamber of Commerce in China analysis based on 2016 NBS data. *2017 and 2018 are estimates considering GDP growth, inflation and wage increases in the past. ** Factor represents the ratio of regional wage to national average for 2018. Monthly wages, based on 12-months year basis; all wages are pre-tax

top-5 highest paying locations.

Minimum Wages and Guidelines

In 2018 only four provinces have issued wage guidelines by

the end of June: Shanghai, Shandong, Inner Mongolia, and

Shanxi; the other eight provinces issuing wage guidelines in

2018 had done it at the beginning of the second half of the

year. In 2017 a similar situation occurred, where four

provinces issued their recommendations in the first

semester, and another 19 provinces produced their

guidelines in the second half of 2017.11

Issuing wage guidelines traditionally took place within the

first semester, something that seems is changing in light of

the last two years development. Additionally, the pace in the

increase of wage guidelines has been slowing down over the

years. The fact that local governments are also postponing

their issuance – the number of provinces issuing wage

guidelines in the first semester has been declining since 2015

– signals their reluctance to lose competitiveness in their

labor costs.

Moreover, minimum wages have been existing in China since

1994, but it was not until ten years later that they were

enforced by the local labor authorities.

Regional governments set their minimum wages, based on

local living costs, local wages and the overall supply and

demand for labor of their respective local economies.

Minimum wages in 2018 have increased 11.4%, versus

10.7% last year. However, this average increase conceals the

fact that for certain provinces the minimum wage increase

this year comes after one or two years with no variation.

Guangxi presents a rise of 19.8% over its previous minimum

salary, which was set in 2015; Sichuan’s minimum wage rose

19.6% and Tibet’s 17.9%, both updating minimum wages set

back in 2016. Other provinces that have increased their

minimum wage in 2018 are Shandong, Yunnan, and Xinjiang.

In 2018 Shanghai increased its minimum wage from RMB

2,300 to RMB 2,420, representing the highest minimum

wage in China.

Beijing announced that effective 1st September 2018, it will

increase its monthly minimum wage from RMB 2,000 to

RMB 2,120. With such an increase, it will have the third

highest minimum wage in China, behind Shanghai and

Shenzhen.12 Minimum wage rates in tier-1 cities have

doubled since 2010, but increases in other provinces have

not kept such a pace. For example, minimum wage rates in

Dongguan (a prefecture-level city in Guangdong province,

belonging to the Category B wage district) were practically

identical to those of Beijing in 2010, whereas in 2018

Beijing’s minimum wage was almost RMB 500 higher than

Dongguan’s. The slower wage growth is partially due to the

efforts of the Guangdong government trying to prevent

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Region CategoryLast

Increase*

A B C D E F (%) Valid since

Beijing 2,120 - - - - - 12.2 Sept 20181

Tianjin 2,050 - - - - - 4.9 Jul 2017

Hebei 1,650 1,590 1,480 1,380 - - 12.5 Jul 2016

Shanxi 1,700 1,600 1,500 1,400 - - 5.4 Oct 2017

Inner Mongolia 1,760 1,660 1,560 1,460 - - 8.1 Aug 2017

Liaoning 1,620 1,420 1,300 1,120 - - 7.6 Jan 2018

Jilin 1,780 1,680 1,580 1,480 - - 18.1 Oct 2017

Heilongjiang 1,680 1,450 1,270 - - - 15.5 Oct 2017

Shanghai 2,420 - - - - - 5.2 Apr 2018

Jiangsu 2,020 1,830 1,620 - - - 14.7 Aug 2018

Zhejiang 2,010 1,800 1,660 1,500 - - 8.4 Dec 2017

Anhui 1,520 1,350 1,250 1,150 - - 28.8 Nov 2015

Fujian 1,700 1,650 1,500 1,380 1,280 - 19.9 Jul 2017

Jiangxi 1,680 1,580 1,470 - - 10.1 Jan 2018

Shandong 1,910 1,730 1,550 - - - 5.5 May 2018

Henan 1,900 1,700 1,500 - - - 17.1 Oct 2018

Hubei 1,750 1,500 1,380 1,250 - - 13.2 Nov 2017

Hunan 1,580 1,430 1,280 1,130 - - 12.9 Jul 2017

Guangdong 2,150 1,720 1,550 1,410 - - 6.2 Jul 2018

Guangxi 1,680 1,450 1,300 - - - 19.8 Feb 2018

Hainan 1,430 1,330 1,280 - - - 13.5 May 2016

Chongqing 1,500 1,400 - - - - 20.8 Jan 2016

Sichuan 1,750 1,650 1,550 - - - 19.7 Jul 2018

Guizhou 1,680 1,570 1,470 - - - 4.9 Jul 2017

Yunnan 1,670 1,500 1,350 - - - 9.0 May 2018

Tibet 1,650 - - - - - 17.9 Jan 2018

Shaanxi 1,680 1,580 1,480 1,380 - - 15.5 May 2017

Gansu 1,620 1,570 1,520 1,470 - - 10.8 Jun 2017

Qinghai 1,500 - - - - - 19.1 Jun 2017

Ningxia 1,660 1,560 1,480 - - - 12.2 Oct 2017

Xinjiang 1,820 1,620 1,540 1,460 - - 10.4 Jun 2018

Shenzhen 2,200 - - - - - 3.3 Jul 2018

Minimum Wage Rates in China 2018

Source: Provincial Human Resources and Social Security Bureaus and German Chamber of Commerce in China analysis. Categories refer to different wage districts or jurisdictions within a province. Local governments are responsible for setting minimum wages. *Increases are calculated as the average increases of adjustments for all categories in the region. With the exception of Shenzhen, only provinces and province-level municipalities set minimum wage levels. 1. Beijing minimum wage rates were published in 7th July 2018, but will be implemented starting from 1st September 2018

manufacturing businesses from moving to other provinces in

China’s west with lower labor costs.

China’s minimum wage regulations stipulate that each region

should set its minimum wage somewhere between 40 and 60

percent of the average local salary. However, that is hardly

the case and only very few cities have reached that target. In

many cities, the minimum wage is now just 25 percent of the

average wage, while in Beijing and Chongqing it is as low as

20 percent.

To some analysts, the fast-rising salaries in China have their

roots in China’s minimum wage regulation, used by Beijing

not only as a social policy tool to redistribute resources in its

efforts to reduce inequality, but also as an industrial policy

signaling manufacturers to either become more productive,

move up the value chain inside China, or leave.13

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SOEs Hong Kong, Taiwan, MacauShareholdingLLC

0

20,000

40,000

60,000

80,000

100,000

120,000

2013 2014 2015 2016 2017 2018*

SOEs Hong Kong, Taiwan, MacauShareholdingForeign LLC

Source: NBS & German Chamber of Commerce in China analysis. Average wages in RMB. *Estimates from the Chamber’s own analysis

Average Annual Wages by Form of Ownership

2013-2018

Wage Levels by Ownership in Relation to Foreign Companies

Foreign companies=100

40%

50%

60%

70%

80%

90%

100%

110%

2005 06 07 08 09 2010 11 12 13 14 2015 16 17 2018*

Source: NBS & German Chamber of Commerce in China analysis. Average wages in RMB. *Estimates from the Chamber’s own analysis

Industry 2016 2017Growth

(%)Factor*

IT 10,207 11,096 8.7 1.79

Finance 9,785 10,238 4.6 1.65

Tecnical Services, R&D 8,053 8,985 11.6 1.45

Utilities 6,989 7,529 7.7 1.22

Healthcare 6,669 7,471 12.0 1.21

Culture 6,656 7,317 9.9 1.18

Education 6,208 6,951 12.0 1.12

Business Services 6,399 6,783 6.0 1.10

Transport & Logistics 6,138 6,685 8.9 1.08

CHINA 5,631 6,193 10.0 1.00

Retail & Wholesale 5,422 5,933 9.4 0.96

Mining 5,045 5,792 14.8 0.94

Real Estate 5,458 5,773 5.8 0.93

Manufacturing 4,956 5,371 8.4 0.87

Construction 4,340 4,631 6.7 0.75

Water & Environment 3,979 4,352 9.4 0.70

Residential Services 3,965 4,213 6.3 0.68

Hospitality 3,615 3,813 5.5 0.62

Agriculture 2,801 3,042 8.6 0.49

Source: NBS. * Factor represents the ratio of INDUSTRY-specific average wage to national average wage for 2017. Monthly wages, based on 12-months year basis; all wages are pre-tax

3. Wages by Industry and Ownership

Wages in the IT industry remain at the helm of compensation

rankings in China. In 2016, IT salaries surpassed Finance,

according to metrics by the National Bureau of Statistics

(NBS). China’s Internet Plus strategy and the country’s

willingness to lead the race in the development of cutting

edge technologies (artificial intelligence, big data, robotics,

facial recognition, self-driven vehicles, etc.) facilitates capital

flowing into IT start-ups and established businesses alike.

This results in the increasing demand for IT professionals

where both those start-ups and established technology

players keep poaching talent from one another.14 IT wages

almost double China’s average in 2017, with much larger

increases around the country’s technology clusters – mostly

Beijing and Shenzhen, but also Shanghai and Hangzhou. All in

all, IT wages increased by 8.7% in 2017 – below China’s

overall 10.0% increase.

Presenting above-than-national average wage increases in

2017, we find other high-end services industries: healthcare

and education (both growing 12%), technical services &

scientific research (11.6%). However, the most notable wage

increase was recorded in the mining industry (14.8%), after

some years of moderate and even negative growth. What led

to such pronounced increase? Feasible hypotheses entail

wages picking up on positive outcomes coming from recent

developments. On the one hand, the supply-side structural

reforms to address overcapacity that kicked off back in

2015, resulted in moderated increases of total output (coal

up 3.3% from 2016, crude steel 3.0%, rolled steel 0.1%,

nonferrous metals 2.9%, aluminium 2.0%, and refined copper

6.3%).15 On the other, a strong property and infrastructure

market, stimulating the demand for building materials (steel,

cement, copper). These two developments boosted prices

and profits in the mining industry, the latter rising 261.6%

from a year earlier in 2017, up from a 27.5% loss in 2016.16

On the ownership side, foreign-owned companies remain the

highest paying in China (RMB 95,378, annual salary).

However, Chinese shareholding and state-owned enterprises

(SOEs) remain close to this level.

Shareholding wages have grown at an average of 8.0%

during the period 2014 - 2017. In 2014, the wage differential

against foreign-owned companies started to widen slightly,

with salaries growing in the latter 8.9% on average during

that three year period. As a result, if in 2014 wages at

shareholding companies were 96.6% of foreign ones, in 2017

they represented 94.4%.

SOEs, with an average compensation 90.1% of the one of

foreign-owned companies in 2017, were at 82.1% in 2014.

During this three year period wages grew 12.3% on average

– that is 3.4 percentage points above the growth of foreign-

owned companies.

Wage Developments by Industry 2017

Ranked Based on 2017 Wages

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Source: NBS & Chamber of Commerce in China analysis. GDP deflator (rebased, 2010=100) has been used to deflate prices. Productivity increase refers to the percent variation in output per worker (total) compared to the previous year

0%

3%

6%

9%

12%

15%

18%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

06 07 08 09 2010 11 12 13 14 2015 16 2017*

PrimarySecondaryTertiary Total Productivity increase (%)

China’s Output per Worker: Overall and by Sector

RMB per Employed Person, at 2010 Prices

China & Asia Pacific Productivity Comparisons

GDP per Employed Person, at 2011 PPP USD

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2012 2013 2014 2015 2016 2017

Japan

Rep. of Korea

Malaysia

China

PhilippinesIndia

Vietnam

Source: World Bank. World Development Indicators database

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2012 2013 2014 2015 2016 2017

Hungary

Poland

Turkey

China

Bulgaria

Source: World Bank. World Development Indicators database. *CEE: Central and Eastern Europe economies

China & CEE* Productivity Comparisons

GDP per Employed Person, at 2011 PPP USD

4. Productivity

With the current preliminary accounting results for 2017 –

GDP of RMB 82.7 trillion - the output per employed person

grew by 7.2% to reach RMB 88,849 (at 2010 prices).17

Compared to 2016, production per employed person has

increased by 0.9 percentage points. Productivity gains came

fundamentally from the secondary (manufacturing) sector.

China remains well ahead in productivity terms from some of

its regional neighbors, most notably India - the other big

developing economy in the region. Though, it still falls far

behind developed economies such as Japan or the Republic

of Korea.

In contrast to developed economies, China still has plenty of

room for productivity gains through market-driven reforms

and innovation. In its efforts to transition to a domestic-

driven economy China has made significant progress to

promote innovation.18 Five years ago the top 5 Chinese

brands were predominantly SOE’s: China Mobile, ICBC,

China Construction Bank, Bank of China and Agricultural

Bank of China.19 Today these brands are all except one tech

companies: Tencent, Alibaba, China Mobile Games &

Entertainment, ICBC, and Baidu.20

The country’s spending in R&D – around 2% of its GDP - is

higher than in a number of OECD economies (i.e. Italy,

Canada, UK);21 and filing patent numbers are soaring, with

China remaining in 2017 as the primary driver of global

growth in patent filing.22

Following a decline in GDP growth at the end of 2015, China

implemented demand-side policies to stimulate growth. The

efforts focused on "old economy" tactics, such as loosening

credit to fund SOE investment, housing, and infrastructure

spending. Such policies did indeed spur growth, as seen in

the steady GDP growth quarter after quarter since 2016.

Such capital investment was useful as a policy tool to

procure economic stability in the short term. On the

downside, it contributed further to a sub-optimal use of

financial resources. Before 2009 a 1.5 percentage point

growth in credit yielded 1 percentage point of growth in

China’s GDP. In the period 2009 – 2016 to get to the same

outcome 3.5 percentage points of debt were needed.

Capital accumulation is the main contributor to growth (62%

if we count both information technology (IT) and non-IT

capital input).The less productive use of debt remains among

the main reasons for concern when it comes to China’s

financial stability.

Source: Asian Productivity Organization. Asian Productivity Databook 2017

2642 34

53

45 56

11

621 125

1970-1985 1985-2000 2000-2015

Labor inputCapital input (non-IT)TFP Capital input (IT)

China’s Sources of Economic Growth (%)

Contribution to GDP Growth of Capital, Labor and Total Factor

Productivity (TFP)

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5. Notes

1. National Bureau of Statistics (NBS). Press Release. 5th May 2018.

http://www.stats.gov.cn/tjsj/zxfb/201805/t20180515

_1599424.html (in Chinese)

2. “China Wage Levels Equal To Or Surpass Parts Of Europe”.

Forbes. 16th August 2017. https://www.forbes.com/sites/

kenrapoza/2017/08/16/china-wage-levels-equal-to-or-

surpass-parts-of-europe/

3. “China's resident income rises 7.3 pct in 2017”. Xinhua Net. 18th

January 2018. http://www.xinhuanet.com/english/2018-

01/18/c_136905784.htm

4. The Gini Coefficient measures how income is distributed in a

society. Values range from 0 (complete equality, a society

where all its members have the same income) to 1 (complete

inequality, a society where only one member has all the income

and the rest nothing). Real values move between 0.250 for the

more income-balanced societies (Iceland, Norway, Denmark)

and 0.600 in countries such as South Africa, Namibia or Haiti.

For statistics on China’s Gini Coefficient see:

https://www.ceicdata.com/en/china/resident-income-

distribution/gini-coefficient

5. “China’s Gini coefficient exceeded 0.4 in 2017”. People’s Daily.

6th February 2018. http://en.people.cn/n3/2018/0206/

c90000-9424307.html

6. “China plans income tax cut to boost consumption and reduce

inequality”. Financial Times. 2nd July 2018. https://www.ft.com/

content/9cbfac2c-7db8-11e8-bc55-50daf11b720d

7. “Personal Income Tax Law Amendment (Draft) for Comments”.

China National People’s Congress. June 2018.

http://www.npc.gov.cn/npc/flcazqyj/2018-

06/29/content_2057033.htm (in Chinese)

8. See 6.

9. “Average Annual Salary of Employed Persons in Urban Units in

2017 was RMB 74,318”. National Bureau of Statistics Press

Release. 15th May 2018. http://www.stats.gov.cn/tjsj/zxfb/

201805/t20180515_1599424.html (in Chinese)

10. According to the NBS, the average wage is obtained as the

“Total Salary of All People Employed” divided by the “Total

Number of People Employed”. In its definition of the former the

NBS includes subsidies in any form, but there is no explicit

mention of whether, or how, transfers from the national

government are included in the calculation. For further details

see: http://www.stats.gov.cn/tjsj/zbjs/201310/t20131029_44

9543.html (in Chinese)

11. In the Labor Market & Salary Report 2017/2018, with only 4

provinces having updated their minimum wage guidelines the

results presented in this report were : 3% for the Minimum, 8%

as Average, and 12.5% Maximum. After including all 23

provinces that ended up issuing recommendations the actual

averages were: no change for the Minimum, 7.8% for the

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9. Average, 12.3% for the Maximum

12. “Beijing’s Minimum Wage to Rise September 1”. China Briefing.

3rd July 2018. http://www.china-briefing.com/news/2018/

07/03/beijings-minimum-wage-to-rise-september-1.html

13. “China’s rising wages policy has a logical end game”. SCMP. 3rd

March 2017. https://www.scmp.com/business/china-

business/article/2075730/chinas-rising-wages-policy-has-

logical-end-game

14. “China goes on tech hiring binge and wages soar, closing gap

with Silicon Valley”. Reuters. 25th January 2018.

https://www.reuters.com/article/us-china-economy-tech-

analysis/china-goes-on-tech-hiring-binge-and-wages-soar-

closing-gap-with-silicon-valley-idUSKBN1FD37S

15. China’s frontrunner position in electric vehicles, with electric

cars containing as much as four times more copper than

combustion engine cars would explain the relatively high

increase in copper mining, when compared to other raw

materials.

16. “China's 2017 industrial profits post fastest growth in six years”

Reuters. 26th January 2018. https://www.reuters.com/article/

us-china-economy-industrial-profits/chinas-2017-industrial-

profits-post-fastest-growth-in-six-years-idUSKBN1FF092

17. China’s GDP for 2017 was RMB 82.7 trillion. Total employed

population in 2017: 776.40 million. As a measure of labor

productivity we use the total output of the economy divided by

the total number of workers. That is a productivity of RMB

106,533 at 2017 prices. To allow for comparisons across time

we use the GDP deflator with 2010 as a base year to convert

prices: 2010=100, 2017=119.10. Therefore, the output per

worker in 2017 was RMB 88,849 at 2010 prices, a 7.2%

increase compared with labor productivity in 2016: RMB

82,910 (also at 2010 prices).

18. “What can China do to promote long-term productivity?” CNBC.

27th October 2017. https://www.cnbc.com/advertorial/

2017/10/27/what-can-china-do-to-promote-long-term-

productivity.html

19. 2012 Top 5 Chinese Brands: http://www.businessinsider.com/

here-are-chinas-20-most-valuable-brands-2012-3?IR=T#5-

agricultural-bank-of-china-5

20. 2017 Top 5 Chinese Brands: http://www.businessinsider.com/

the-most-valuable-brands-in-china-2017-3?IR=T

21. OECD Economic Surveys China Overview. March 2017

https://www.oecd.org/eco/surveys/china-2017-OECD-

economic-survey-overview.pdf

22. “China Drives International Patent Applications to Record

Heights; Demand Rising for Trademark and Industrial Design

Protection” World Intellectual Property Organization. March

2018. http://www.wipo.int/pressroom/en/articles/2018/

article_0002.html

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-3%

0%

3%

6%

9%

12%

15%

18%

21%

2005 06 07 08 09 2010 11 12 13 14 2015 16 17 18 2019

5%

8%

11%

14%

17%

20%

23%

2012 2013 2014 2015 2016 2017 2018* 2019

Wage Growth Indicators (%)

GDP, Consumer Price Index and Wage Growth (%)

III General Survey Results

1. Expected Wage Developments at GermanChamber Companies

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.

The forecasted salary increase of 5.99% for 2019 is 0.09

percentage points (p.p.) above last year’s forecast. Although

only a very mild increase, this year’s result represents an end

to the downward trend of salary growth rates reported

during the last seven years.

The upward trend of wage developments at German

companies in China is reflecting the evolution from 2017 to

2018 of effective national wage increases, minimum wages

and regional wage guidelines (issued by provincial

governments). Growth of national wages picked up some

momentum and is moving from 10.0% in 2017 to 10.1% in

2018, according to the Chamber’s estimates; growth for

minimum wages has gone up (from 10.7% to 11.1%); while

wage guidelines have remained stable, growing at 7.8% on

average during both years.

It remains to be seen whether 2019 will represent a tipping

point in the overall downward trend the survey has been

recording so far or whether salary growth expectations will

stabilize at around the 6.0% - in the vicinity of China’s annual

GDP growth. The analysis on the evolution of both China’s

GDP and wages at German Companies since 2012 until

today seems to suggest the latter. Forecasted wage increase

for German Companies in 2018 (5.90%) gravitates close to

China’s GDP growth (6.8% during the first half of 2018).

From 2012 until 2018, the average GDP growth in China has

been 7.13%, and the German Chamber’s forecast wage

increase for that period has yielded an average of 7.90%.

Both data series have become more intertwined since 2015

(see in this page graphic GDP, Consumer Price Index and Wage

Growth (%)).

The slight acceleration in the overall forecast wage increase

at China level has its nuances and conceals differences when

breaking it down to specific industries, city tiers, company

sizes or regions. Differences between regions, will be

analyzed in more depth in the next section of this chapter –

with a further breakdown by production roles and level of

seniority.

When looking at expected wage increases by industry it

should be noted that most of the contributions to the survey

come from the machinery / industrial equipment and

Expected Wage Growth Development at German

Companies in China (%) Nominal Growth

10.20

8.90 8.808.10

7.10

6.235.90 5.99

2012 2013 2014 2015 2016 2017 2018 2019

Source: German Chamber of Commerce in China analysis.*National wage growth: estimate

Source: German Chamber of Commerce in China analysis. 2018 Consumer inflation: year-on-year increase in June. GDP growth: 6.6 % in 2018, 6.4% in 2019 as per International Monetary Fund (IMF) forecasts

Note: Wage growth is obtained as the average of the expected 2019 salary increases forall positions surveyed in the 2018/19 edition

Minimum wage

National wage

Wage guidelines

German companies expected wage growth

German companies expected wage growth Consumer pricesNational wageGDP

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automotive industries, together accounting for almost 54%

of the total number of observations (see subsection 12.

Profile of Companies and Contributors in this chapter for more

details about the sample composition).

The automotive industry presents a forecast wage increase

of 6.63% for 2019, very similar to its 2018’s mark. It also

remains the industry with the highest expected wage

increases. On the other hand, machinery / industrial

equipment presents the highest leap forward, gaining +0.34

p.p. over last year’s expected increase, to average 5.89%.

The industries medical supplies and plastic & metal products

also present accelerations in their respective wage growth

rates, more pronounced in the former (+0.12 p.p. on a yoy

basis) and very mild for the latter (+0.04 p.p.).

In opposition to the above, three specific industries present a

slowdown in their expected wage growth rates, when

comparing with last year’s reported expectations for 2018.

The most notable case is consulting / legal services, which

saw a drop of 1.22 p.p. on its 2018 mark, reaching an

expected increase of 4.84% for 2019. Less pronounced, but

in the same direction, chemicals (-0.25 p.p.) and electronics (-

0.22 p.p.).

A glimpse at the results by company size (distinguished by

the number of employees) shows, in this edition of the

report, that the higher the headcount, the higher also the

expected wage growth.1 The most notable acceleration in

wage growth is, however, at the smallest sized companies

(less than 50 employees) expecting to increase salaries by

5.87% (+0.13 p.p.).

When shifting the analysis to city tier, the highest wage

increase is to be expected in tier-2 cities (6.17%). Both tier-1

and tier-2 cities present a similar pace of acceleration in their

wage growth (around +0.15 p.p.). Tier-3 cities expect to put

forward a wage increase of 5.35%, representing the only

slowdown in wage growth (-0.38 p.p.).

6.6

0

6.0

2

5.5

5

5.8

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5.74

6.016.17

5.35

Tier 1 Tier 2 Tier 3

5.74

5.95 5.93

5.87

5.99

6.07

<50 50-250 >250

2019 China average

Expected Wage Increases by Industry (%)

2019 China average

Expected Wage Increases by Company Size (%)

Company Size by Number of Employees

Expected Wage Increases by City Tier (%)

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2018 2019

2019 China average2018 2019

2018 2019

Note: only industries with at least 10 different companies and more than 100 data pointsfor the 2019 expected wage increase variable.

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Shanghai TAI/KUN Beijing Other North Guangzhou

Suzhou Other YRD Tianjin Shenzhen Other PRD

Regional Wage Increases: Mid-Level Positions (%)

2. Regional Wage Developments

The mild uptick in the evolution of the overall results for

China, with wages expected to grow 5.99% next year versus

5.90% in 2018, does not reflect a China-wide phenomenon.

When looking at the developments by region it shows that

the major part of the acceleration in wage increases is

expected in the Yangtze River Delta areas and Guangzhou.

Combined, Shanghai, Suzhou, Taicang, Kunshan and other

locations in the Yangtze River Delta produce an expected

wage increase of 6.16% in 2019 (+0.23 p.p. in comparison

with last year’s mark). In North China, all the locations for

which results have been segmented (Beijing, Tianjin, Other

North) present a slowdown in expected wage growth for

2019: 5.54% (-0.17 p.p.). A very similar picture occurs in

South China, where Shenzhen and Other Pearl River Delta

areas will also put forward lower wage increases in 2019

(5.90%) than what they had reported for 2018 (6.03%); only

Guangzhou heads in the opposite direction, with expected

wage increases growing to hit 6.09% (+0.93 p.p.).

If breaking the results down by region as well as different

levels of seniority (junior, mid-level, and senior professionals)

wage increases follow the same dynamic as for the overall

regional results. The pace increases only in the Yangtze River

Delta areas and Guangzhou, except for one instance: in

Suzhou, the expected wage increase for junior professionals

in 2019 is 6.25% (-0.40 p.p. compared to last year).

For production-based roles (an aggregate of the individual

positions blue collar, operator, shift leader, supervisor, and

plant / production manager) wage acceleration is also to be

expected in Beijing and Tianjin, as well as in Shenzhen –

though neither in Guangzhou nor Suzhou.

Finally, for senior management roles (CEO/GM, and Deputy

GM), the evolution of wage increases presents a much more

scattered picture. Tier-1 locations such as Beijing and

Shanghai expect lower wage increases than those

experienced last year; whereas in Shenzhen and Guangzhou

wage growth is expected to pick up.

20192018

Regional Wage Increases

TAI / KUN: Taicang & Kunshan; Other YRD: Other Yangtze River Delta areas; Other PRD:Other Pearl River Delta areas

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20192018

Regional Wage Increases: Production Workers (%)

TAI / KUN: Taicang & Kunshan; Other YRD: Other Yangtze River Delta areas; Other PRD: OtherPearl River Delta areas. Production workers: Blue collar, operator, shift leader, supervisor andplant/production manager








Regional Wage Increases: Junior Positions (%)

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TAI / KUN: Taicang & Kunshan; Other YRD: Other Yangtze River Delta areas; Other PRD:Other Pearl River Delta areas. Senior Management: combined results from positions CEO/ GM and Deputy GM/ Branch Manager



Regional Wage Increases: Senior Positions (%)

Regional Wage Increases: Senior Management (%)

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3. Wage Levels

The total cost per employee2 is provided as a measure of

compensation. In the current edition of the report, the

median compensation among German companies in China in

2018 is RMB 14,320, whereas the mean (average) is RMB

22,775.3 Only Shanghai, Beijing, Tianjin and Suzhou present

median values above China’s overall.4

As in the past edition, Beijing and Shanghai are the regions

presenting the highest levels of compensation. Both register

the same median total cost per employee (RMB 18,000),

although Beijing has a slightly higher mean (RMB 27,828,

+RMB 680 above Shanghai’s). On the other side of the scale,

south China regions – Other Pearl River Delta areas,

Shenzhen and Guangzhou – together with Other North

present the lowest levels of compensation.

Based on median values, consulting / legal services and

machinery / industrial equipment industries (5.3% and 33.7%

of overall contributions, respectively) are the highest paying

ones. All other specific industries register median levels of

compensation below China’s overall level,5 with

compensation at plastic / metal products reporting the

lowest level, followed by Electronics and consumer goods,

with median total cost per employee at RMB 11,989 and

RMB 12,893 respectively. The rest of the industries

introduced in the graphic Comparison of Wages at Industry

Level present median values that fall only slightly short of

China’s overall level, Chemicals (RMB 520 below China’s),

medical supplies (RMB 320 less), and automotive (RMB 157

less).

Analyzing compensation levels by seniority shows a direct,

and logical, relationship: the higher the level of seniority, the

higher the compensation.

Looking at the disparity between the median and mean

values, it shows that the one of production worker levels is

quite pronounced, the mean (RMB 14,614) being 62%

higher than the median (RMB 9,010). That is because this

position is a construct that sums up to a single number the

compensation of five different roles at the factory level: blue

collar professionals, operators, shift leaders, supervisors, and

production / plant managers. When looking at these roles

individually, disparities between median and mean fall back

to more reasonable ranges, with disparities of 6% to 8%

between the two measures.

When analyzing the different levels of compensation by

company size, we see that the median total cost per

employee hardly moves across the three different categories

by which company size has been split.

Finally, when looking at compensation levels by city tier,

median values throughout vary significantly, showing a

decreasing trend as compensation moves from tier-1

14

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16

.0

Wages at Regional Level in China

Total cost per employee / month. In thousand RMB

Median Mean

CHINA

TAI / KUN: Taicang and Kunshan; Other YRD: Other Yangtze River Delta areas; OtherPRD: Other Pearl River Delta areas

22.0

15.0

14.3

14.2

14.0

13.8

12.9

12.0

11.6

33.7

23.1

22.8

21.9

24.8

24.3

20.9

16.3

19.5

Median Mean

Comparison of Wages at Industry Level

Total cost per employee / month. In thousand RMB. Ranking by

median values

Consulting / Legal Services

Medical Supplies

Chemicals

Automotive

CHINA

Machinery / Industrial Equipment

Electronics

Plastic / Metal Products

Consumer Goods

Note: Only industries with at least 10 companies and 100 observations when combiningall data points collected for the 39 different positions measured in the survey



14

.3

9.0 8

.5

14

.0

30

.0

70

.0

11

0.0

22

.8

14

.6

9.5 15

.6 32

.5

78

.1

12

0.9

CHINA ProductionWorkers

Junior Mid-Level Senior DeputyGM/BM

CEO/GM

Production Workers, Level of Seniority & Senior

Management


Median Mean

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.3

9.0

5.9

6.5 8

.5

14

.0

34

.0

22

.8

14

.6

6.3 6

.9 9.0

14

.9

36

.6

CHINA ProductionWorkers

Blue Collar Operator Shift Leader ProductionSupervisor

Production /Plant

Manager

Median Mean

14.317.0

12.510.4

22.8

25.8

20.5

16.5

CHINA Tier 1 Tier 2 Tier 3

Comparison of Wages by City Tier


Median Mean

Median Mean

Comparison of Wages by Company Size (nº of Employees)


14.3 15.0 14.0 14.0

22.824.2

22.1 22.9

CHINA Less 50 50-250 More 250

15.016.7

12.010.6

14.0

16.6

12.310.5

14.0

17.5

12.8

10.2

CHINA Tier 1 Tier 2 Tier 3

Comparison of Wages by City Tier & Company Size

Total cost per employee / month. Median values. In thousand

RMB50-250Less 50 More 250

locations to tier-3.Production Workers: Break Down Individual Positions


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Evolution

Perceived Salary Level in Comparison to Other Companies (%)

26.5

16.3 17.6

26.023.3 24.2

64.1

72.5 73.4

65.169.6 69.3

9.4 11.1 9.1 8.9 7.1 6.5

2013 2014 2015 2016 2017 2018

White Collar Workers

26.222.0

19.422.6 22.6 21.4

63.166.5

70.766.0

71.1 71.6

10.7 11.4 9.911.4

6.3 7.0

2013 2014 2015 2016 2017 2018

Low Average High

Average HighLow

Average HighLow Average HighLow

5.6

75.6

18.9

9.0

64.8

26.2

5.8

77.0

17.2

Less 50 50-250 More 250

4.5

67.7

27.8

10.4

66.4

23.1

3.4

76.1

20.5

Less 50 50-250 More 250

Blue Collar Workers

AverageLow High

Average HighLow

Evolution

Results by Region Results by Region

3.6

10.5

12.5

2.9

13.5

14.3

5.6

13.3

5.3

69.6

63.2

68.8

77.1

70.3

85.7

53.6

72.2

66.7

68.4

26.8

26.3

18.8

20.0

16.2

46.4

22.2

20.0

26.3

Shanghai

Suzhou

Taicang / Kunshan

Other YRD

Beijing

Tianjin

Other North

Shenzhen

Guangzhou

Other PRD

Other YRD: Other Yangtze River Delta areas; Other PRD: Other Pearl River Delta areas

Results by Company Size Results by Company Size

4. Compensation Levels: Perception

Whether enquired about blue or white collar professionals,

German companies perceive the salaries they offer to be

mostly within market average.

Small sized companies are more prone to consider their

compensation levels to be above the market’s average when

it comes to white collar professionals (27.8% among firms

with less than 50 employees; 24.2% overall). This this does

not, however, occur when it is about blue collar

professionals. 77% of all small-sized companies gathered in

this edition are located in tier-1 cities, which might be an

explanation to why salaries for white collar professionals

are perceived high in a more significant proportion among

small firms.

At a regional level, salaries paid to blue and white collar

professionals are more likely to be perceived above the

market average among those companies that are in South

China.

In China’s southern regions, blue collar’s compensation is

labeled as above the market in higher proportion than that of

white collar’s. In the Yangtze River Delta regions, however,

this goes the other way around: white collar’s compensation

levels are perceived as being above the market more

frequently.

9.3

10.0

5.9

4.0

7.1

11.5

8.3

72.2

76.5

73.3

73.5

80.0

78.6

57.7

71.4

58.3

68.4

18.5

23.5

16.7

20.6

16.0

14.3

30.8

28.6

33.3

31.6

Shanghai

Suzhou

Taicang / Kunshan

Other YRD

Beijing

Tianjin

Other North

Shenzhen

Guangzhou

Other PRD


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64.0

13.5

23.9

60.2

15.9

Lower Similar Higher

11.5

74.7

13.8

Evolution

Similar HigherLower

5. Productivity

In previous editions of the report, the results tended to

emphasize how German companies perceived the gap

between productivity and wages to be shrinking in a context

of a slowdown of wage increase rates.

With next year’s expected wage developments increasing for

the first time, the perception of productivity gains has

remained quite resilient. The portion of companies

considering productivity gains to be similar to wage increases

has dropped by 3.8 percentage points (p.p.) in this edition,

but most of that drop has shifted to contributors that

consider productivity gains overtook wage increases: 15.9%

in this edition, +2.4 p.p.

Companies located in Tianjin (3.9% of the sample) and

Suzhou (5.3%) find productivity gains to be lower than salary

increases in higher proportion than China’s average: 38.5%

and 31.6%, respectively. In South China, German companies

are also more likely than average to find productivity below

wage increases – although in Shenzhen and Guangzhou the

same is true for the proportion of companies that consider

just the opposite.

Regarding the perception of the level of wages considering

productivity and qualifications there are no substantial

changes in comparison with last year’s results, just a slight

improvement in the overall results. The proportion of

companies that see salaries to be high has dropped by 6.9

p.p., to settle at 22.0%; on the other hand, 24.3% of

companies consider them low – that is +2.6 p.p. above last

year’s results.

When asked about the prospects for the future, on whether

productivity increases will be able to match wage increases

the sentiment remains positive, though a little more

conservative than in the past edition: 14.4% of companies

consider it an unlikely scenario (13.5% last year); also, the

proportion of companies that see it as likely has dropped to

50.7% (58.2% last year).

From a regional perspective, looking at the three

productivity-related questions in the survey - evolution of

productivity gains versus wage increases, how do salaries

look once productivity and qualifications are taken into

account, and whether or not productivity will be able to

catch up with wage increases in the future - Suzhou and

Tianjin are less optimistic in general, whereas Guangzhou and

Other North regions tend to see current and future

productivity levels in a much more favorable light.

By company size, those with less than 50 and between 50 to

250 employees tend to be more pessimistic on their

assessments about productivity increases when comparing

Productivity Increase Compared to Wage Increases (%)

Results by Company Size

Similar HigherLower

30.0

56.2

13.8

Less 50 50-250 More 250

Results by Region

23.4

31.6

22.6

14.7

22.9

38.5

22.2

27.8

28.6

26.3

64.2

52.6

71.0

61.8

57.1

53.8

48.1

44.4

42.9

73.7

12.4

15.8

6.5

23.5

20.0

7.7

29.6

27.8

28.6

Shanghai

Suzhou

Taicang / Kunshan

Other YRD

Beijing

Tianjin

Other North

Shenzhen

Guangzhou

Other PRD


31.4

43.0

24.8 23.5

29.2

38.7

25.6

19.3

China Less 50 50-250 More 250

Share of Labor Costs over Total Costs (%)

Overall China and by Company Size2017 2018

2017 2018

26.2

54.6

19.2

The exact formulation of the question: “Evaluate productivity increase at your companycompared to overall wage increases”

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16.7

21.1

12.5

11.4

16.2

23.1

3.7

11.1

13.3

10.5

30.4

36.8

40.6

31.4

43.2

30.8

40.7

50.0

26.7

31.6

52.9

42.1

46.9

57.1

40.5

46.2

55.6

38.9

60.0

57.9

23.2

36.8

22.6

20.0

25.0

30.8

15.4

22.2

20.0

0.0

58.0

31.6

48.4

71.4

38.9

38.5

46.2

61.1

40.0

73.7

18.8

31.6

29.0

8.6

36.1

30.8

38.5

16.7

40.0

26.3

ReasonableHigh Low

Evolution

28.9

49.4

21.722.0

53.7

24.3

High Reasonable Low

21.2

56.1

22.7

28.8

47.7

23.5

22.1

59.3

18.6

Evaluation of Wage Levels Considering Productivity (%)

2017 2018

Results by Region


Shanghai

Suzhou

Taicang / Kunshan

Other YRD

Beijing

Tianjin

Other North

Shenzhen

Guangzhou

Other PRD


Reasonable LowHigh

Less 50 50-250 More 250

sentiment towards productivity seems more positive.

In this section of the survey, contributors reply about the

importance of a series of factors to achieve productivity

increases. As in past editions, improving internal processes is

toping this ranking, with 92.9% considering it as important or

very important, followed by better internal training (86.4%),

and the use of KPI’s (84.4%).

Due to differences in the assessment of productivity

between smaller and larger firms in the present edition, the

importance of the different factors has been analyzed for

each of these two categories. The most relevant difference

out of this analytical exercise is the contrast in the

The exact formulation of the question: “Taking productivity and qualifications intoaccount, how do you evaluate overall salary levels in China?”

5.7

38.6

55.7

Evolution

14.4

32.6

53.0

13.5

28.3

58.2

14.4

34.8

50.7

Unlikely Neutral Likely

Neutral LikelyUnlikely

2017 2018

Neutral LikelyUnlikely

Will Productivity Increase Match Wage Increases? (%)

20.3

34.6

45.1

Less 50 50-250 More 250

Results by Region


Shanghai

Suzhou

Taicang / Kunshan

Other YRD

Beijing

Tianjin

Other North

Shenzhen

Guangzhou

Other PRD


The exact formulation of the question: “Do you believe productivity increase will be ableto match wage increases in the future?”

them with salary increases – although the proportion of

those considering that salary increases and productivity gains

are similar remains the majority.

Across the board, looking at all the three questions linking

productivity and wages in one way or the other, smaller

companies (those with less than 50 employees) are being

more pessimistic about productivity trends. They are less

likely to expect productivity gains will catch up with wage

increases in the future, as well as more critical with salaries

when considering qualifications and productivity. They are

also the ones for which labor costs present a higher

proportion over total costs. On the other hand, in those

companies with more than 250 employees, the general

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88.0

86.5

82.0

75.2

72.9

51.1

67.7

95.5

83.0

84.1

79.5

75.0

89.8

64.8

Main Factors for Productivity Increase (%)

At Companies with Less 50 Employees vs. More 250 Employees

Difference in the degree of importance (in p.p.)

Main Factors for Productivity Increase (%)

Ranked by Very Important and Important

More 250Less 50 employees

Very Important + Important (in %) at:

7.5

-3.5

2.1

4.4

2.1

-2.9

41.9

20.4

32.0

16.7

15.3

31.2

11.6

51.0

66.6

52.4

59.2

60.1

36.8

53.3

6.2

11.0

10.8

21.2

19.3

22.9

29.5

6.52

Very important Important Neutral Not important n/a

Improved Internal

Processes

Better Internal Training

Better Work Experience

Use of KPI’s

Improved Retention

Increased Automation

Improved General

Education

Improved Internal

Processes

Better Internal Training

Better Work Experience

Use of KPI’s

Improved Retention

Increased Automation

Improved General

Education

38.7

58.3

29.7

6.61.1 4.3

51.3

23.714.5

3.9 6.6

No strategicchangesplanned

Plan toincrease

automation

Relocationwithin China*

Relocation toanothercountry*

Other

Strategic Changes due to Rising Labor Costs (%)

For Companies that Perceive Wages are High

Companies that perceive wages are high, having considered productivity & qualifications

China

* Relocation to lower labor cost areas

assessment of increased automation as a facilitator of

productivity.

For companies with less than 50 employees, increased

automation is important or very important to “only” 51.1% of

contributors. Furthermore, for small firms, increased

automation is the lowest ranked factor concerning its

relevance for productivity.

When the focus is on companies of more than 250

employees, they give increased automation a much more

prominent role. Improved internal processes remain as the

most important factor (95.5% mention it as very important or

important), while increased automation comes second

(89.8%).

Why is there such a difference in the perceived importance

of automation to drive productivity when segmenting by

company size? A possible explanation could relate to the

high cost burden that the implementation of automation

entails. Whereas bigger firms might be more capable of

investing in the required technologies to upgrade their

capabilities – thus further diluting the ratio of labor costs

over total costs, at smaller firms increased automation might

be perceived still as a risky investment so that other means

are favored to increase productivity.

38.7

58

.3

29

.7

6.6

1.1 4.3

72

.9

11

.6

8.5

0.8 6

.2

58

.6

30

.1

6.8

0.8 3.8

36.4

55

.7

3.4

2.3

2.3

No strategicchangesplanned

Plan toincrease

automation

Relocationwithin China*

Relocation toanothercountry*

Other

Strategic Changes due to Rising Labor Costs (%)

Overall results for China and by Company Size (nº of employees)

50-250 More 250China Less 50

* Relocation to lower labor cost areas

38.7

Finally, as a novelty in this 2018 edition, a new question was

added in the survey enquiring about what strategies

companies have in stock to deal with rising labor costs. At

China level, most of the contributors mention they do not

have any strategic plans in place (58.3%). However a

considerable amount (29.7%) plans to increase automation in

order to better deal with higher labor costs.

When looking into companies that consider wages as high,

still the majority of companies (51.3%) states to have no

strategic changes planned. However, this segment is more

inclined to relocate to lower labor cost areas (14.5% within

China, 3.9% outside China).

When looking at the results by company size, larger

companies show a preference for increasing automation over

relocation options. This aligns with their higher

acknowledgement of automation as an impactful force to

driving up productivity.

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Sup. Medical Insurance

Sup. Housing Fund

Annual Medical Check-up

Meal & Transportation Allowances

Annual Variable Bonus / Sales Commission

Training (In-house or External)

Life & Accident Insurance

Critical Illness Allowances

Other Bonuses (Skill, Retention, Management)

Company Car

Schooling / Welfare for Children

Sup. Pension Plan

Subsidize Studies to Employees

95.9

93.9

79.2

87.5

91.8

81.3

72.9

55.1

67.4

52.1

30.6

25.0

14.6

86.2

85.3

88.8

72.6

79.3

70.7

69.0

54.8

45.2

25.0

21.6

26.1

8.6

55.7

60.5

50.1

43.5

57.4

38.6

29.3

24.3

14.0

15.1

8.0

8.0

34.1

28.1

35.6

41.8

27.0

36.9

45.6

31.1

36.2

23.4

17.6

17.2

10.9

5.1

4.3

9.1

6.5

4.6

8.3

18.0

18.0

23.0

22.6

23.3

24.9

29.1

0.9

2.8

3.7

3.7

5.7

8.0

4.8

13.7

16.0

22.0

23.9

27.2

34.3

4.3

4.6

5.4

8.0

12.9

9.3

16.9

27.0

22.4

23.4

1.5

Common OccasionallyVery Common Rarely n/aNever

6. Components of Variable Compensation:

For the second time, several elements of variable

compensation (a total of thirteen different items) have been

surveyed to assess how frequently they are used to

complement fixed compensation.

Topping the ranking are two health-related benefits and a

cash-related one. Supplementary medical insurance and

annual medical check-ups are used by 89.8% and 88.6% of

the surveyed organizations, respectively. Variable bonuses /

sales commissions follow suit, with 85.8%.6

Following those, there are a series of components that are

used regularly: meal and transportation allowances,

supplementary housing fund, life and accident insurances,

and training – with utilization ranging from 85% to 75%.

Critical illness allowances (55.4%) and other types of bonuses

- skill, retention, management – (50.1%) are the latest of the

benefits enjoying widespread use, common for at least half

of the surveyed organizations. Beyond those, rarely used

components are: providing a company car (38.6%);

supplementary pension plans, schooling/ welfare for children

(both at around 25%); and the least used of all, paying studies

to employees (13.1%).

If splitting the results between companies that only do

production (referred to just-production companies from here

onward) and companies that do not do production in China

(non-production), there are specific differences in the use of

components of variable compensation.7

Variable bonuses / sales commissions are the most common

component of variable compensation for non-production

companies (88.8%); followed by medical check-ups (86.2%)

and supplementary medical insurance (85.3%).

For just-production companies providing a supplementary

housing fund is the third most common component (the fifth

when looking at the results for the overall sample).

The main difference between non-production and just-

production companies is the more extensive use of the latter

concerning the following components: meal and

transportation allowances, supplementary housing fund, and

other bonuses.

Most Common Components of Variable Compensation

Ranked by Very Common+ Common

Supplementary Medical Insurance

Annual Variable Bonus / Sales Commission

Annual Medical Check-up

Meal & Transportation Allowances

Life & Accident Insurance

Training (In-house or External)

Sup. Housing Fund

Other Bonuses (Skill, Retention, Management)

Critical Illness Allowances

Company Car

Schooling / Welfare for Children

Supplementary Pension Plan

Subsidize Studies to Employees

Difference in the degree of usage (in percentage points)

Note: Based on responses to the main focus of operations in China we have created thesetwo segments: Companies that only focus in production in China (n=50) and companiesthat do not do production in China (n=117)

Most Common Components of Variable Compensation (%)

Companies Doing Only Production vs. Non-Production in China

Companies with no Production activity in China

Companies focusing only in Production in China

Very Common + Common mentions (in %) at:

9.7

8.5

-9.6

14.9

12.5

10.6

4.0

0.3

22.2

27.1

9.1

-1.1

6.0

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50.7

48.7

23.0

13.1

7.4

8.6

6.3

5.5

4.6

10.0

5.1

2.9

46.7

44.8

52.7

55.7

53.6

42.2

41.9

42.5

41.5

24.8

27.7

11.4

2.3

6.2

20.4

25.6

31.1

38.8

42.7

38.4

47.2

25.1

36.0

40.6

3.4

3.7

7.1

4.8

6.8

6.1

6.0

22.5

17.7

21.7

5.7

7.5

17.7

13.4

23.4

7. Wage Determination

Among the dozens of factors gauged in the questionnaire to

assess the importance when it comes to salary adjustments,

two remain as the most critical: individual performance and

company performance.

Inflation as well as benchmarking other competitors do also

play a role – but with a considerable gap to the influence

exerted by the previous two.

Retaining staff is perceived as very important or important to

48.2% of the companies, ranking the seventh in importance

when it comes to wage adjustments.

Individual, one-on-one wage negotiations remain as the most

critical factor in wage negotiations, with 73.4% of companies

assessing it as very important or important. There are

however significant differences depending on the particular

company size. A large proportion of smaller companies (less

than 50 employees) see individual negotiations as the

primary factor: 84.6%.

For larger organizations, individual negotiations, although still

a majority, are not that dominant (i.e., in companies with

more than 250 employees “just” 61.2% consider one-on-one

negotiations as the most important factor). Department-wide

negotiations gain relative importance at the expense of

individual negotiations, as the company size increases.

26.4

2.9

1.2

0.3

2.6

47.4

31.9

13.3

11.4

7.2

8.8

ImportantVery important

Individual Negotiations

Department Wide Negotiations

Collective Bargaining

Labor Bureau

Work Council

Official Trade Union

IndividualPerformance

Importance of Factors for Fixing Wage Adjustments (%)

Ranked by Very Important + Important

CompanyPerformance

Inflation

Competition with Other Companies

Seniority of Staff

Meeting Expectations of Staff

Retention of Staff

German Chamber Wage Report

Other Wage Reports

Minimum Wage Adjustments

Government Wage Adjustments

Other Government Policies

Most Important Factors for Wage Negotiations (%)

Ranked by Very Important + Important

n/aVery important Important Neutral Not important

84

.6

27

.9

13

.2

12

.3

7.8

7.0

71

.4

38

.6

13

.6

9.8 12

.0

9.0

61

.2

39

.1

17

.4

13

.8

9.4 11

.5

IndividualNegotiations

Dpt. WideNegotiations

Labor Bureau CollectiveBargaining

Work Council Official TradeUnion

Most Important Factors for Wage Negotiations (%)

Very Important + Important, by Company Size (nº of employees)

50-250 More 250Less 50

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37.6

40.4

31.7

17.4

19.7

10.1

6.2

3.4

3.1

12.6

0.8

48.3

44.9

46.3

49.7

35.7

45.2

23.0

17.1

14.9

5.3

10.7

10.1

9.6

14.0

22.2

31.2

37.6

32.3

33.7

33.7

17.1

37.9

2.2

3.4

6.2

9.0

11.5

4.8

36.0

42.7

46.3

62.1

48.6

High Medium Low No impact

Rising Labor CostsRecruiting Qualified

StaffRetaining Qualified Staff

Social Insurance / Housing Fund

High Staff Turnover

High Cost for Training

Union Organization

Dealing with Labor Bureau

Labor Arbitration Cases

Strikes / Unrest


Impact of HR Related Challenges in Business Operations (%)

Ranked by High + Medium impact

Evaluation of Local Staff Skills (%)

Ranked by Good

Good Fair Poor

78.0

73.0

71.3

66.2

65.3

63.4

58.3

38.3

36.3

35.3

33.4

19.5

24.2

26.5

29.9

33.1

29.9

37.5

49.9

52.7

50.0

52.4

2.5

2.8

2.3

3.9

1.7

6.8

4.2

11.8

11.0

14.7

14.2

Reliability

Technical/Professional Skills

Work Ethics

Team Working Ability

Ability to Learn

English Skills

Communication Skills

Problem Solving

Critical Thinking

Decision Making

Creativity

Recruiting Qualified Staff

Rising Labor Costs

Retaining Qualified Staff

High Staff Turnover

High Cost for Training

Social Insurance / Housing Fund

Strikes / Unrest

Dealing with Labor Bureau

Labor Arbitration Cases


Union Organization

Impact of HR Related Challenges in Business Operations (%)

Companies Doing Only Production vs. Non-Production in China

Companies with no Production activity in China:

Companies focusing only in Production:

Note: Based on responses to the main focus of operations in China we have created thesetwo segments: Companies that only focus in production in China (n=50) and companiesthat do not do production in China (n=117)

46.0

34.2

44.0

38.5

36.0

29.9

18.0

13.7

20.0

16.2

2.0

14.5

4.0

7.7

2.0

3.4

2.0

4.3

18.0

8.5

0.9

38.0

47.9

40.0

39.3

40.0

43.6

52.0

44.4

38.0

38.5

46.0

43.6

22.0

17.1

28.0

9.4

22.0

12.0

4.0

4.3

16.0

6.8

High Medium

High Medium

8. HR Challenges, Retention & Recruitment

When it comes to specific HR challenges that have the

highest impact on business operations, there are, as in

previous editions, three usual suspects topping the podium:

rising labor costs, recruiting, and retaining qualified staff.

Following those, although at a lower level of perceived

impact, come social insurance / housing fund and high staff

turnover.

Finally, unions, strikes, or collective bargaining do not reveal

themselves as particularly challenging according to the

answers of German companies.

When segmenting results between companies that only

focus in production versus companies that do not do

production in China, for the former the recruitment of

qualified staff is as critical to business operations as rising

labor costs: 84% high or medium impact in operations, in both

factors. When companies do not do production at all, the

recruitment of qualified staff comes second after rising labor

costs, with a difference of almost five percentage points

between the two: 82.1% for rising labor costs; 77.8% for

recruitment of staff.

Other relevant differences in the perceptions of these two

segments come when dealing with the labor bureau, the

social insurance / housing fund, or union organization. They

are regarded as more impactful when companies only do

production. For example, the social insurance / housing fund

is considered impactful by up to 70% of companies focusing

only in production; 58.1% when no production is involved.

The same happens with union organization, though the gap

in perception is much more narrow.

For the high cost of training, there is a shift in perception,

with non-production companies assessing it as more impactful

than just-production ones.

Local staff is perceived in general as being reliable, with

strong work ethics, and well equipped concerning technical

and professional skills. Skills are, however, assessed more

conservatively when it comes to creativity, decision making

or critical thinking.

There are three strategies that are considered the most

effective to retain qualified staff: salary adjustments, a bonus

system, and career advancement plans.

Career advancement is the most effective amongst strategies

focusing on professional-development (training, work-life

balance, international placements).

Efforts needed to train staff to get it to the desired level of

qualification seem to have plateaued with around 60% of

n/a

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Insufficient Professional Skills

22.4

19.0

11.4

13.6

12.8

3.1

3.1

1.7

1.7

1.4

1.7

33.8

35.8

37.1

33.7

34.1

19.1

14.6

11.6

11.6

11.3

5.4

Engineering / R&D

Management

Technical Sales

Sales

Marketing

IT

Finance

Procurement

HR

Administration

36.7

38.2

21.2

9.1

19.3

10.8

7.4

3.4

53.4

47.3

50.8

55.0

33.2

31.3

30.6

25.4

7.9

12.5

23.2

32.2

34.7

27.6

43.4

54.6

1.4

1.4

4.0

3.1

11.9

29.3

17.7

15.4

High Salary Expectations

Insufficient English Skills

Insufficient Work Experience

Not Enough Applications

Lack of Experience at Foreign Company

Company Location

Company is Not Competitive Enough

Reasons Why Positions Cannot Be Filled (%)

Ranked by Major Problem + Problem

Most Difficult Positions to Recruit (%)

Ranked by Very Difficult + Difficult

Technical Service

38.4

37.3

41.2

16.1

15.5

15.3

15.3

9.6

11.0

51.4

52.0

45.5

55.1

49.7

48.3

41.0

41.5

34.2

Very effective Effective

Salary Adjustments

Bonus System

Career Advancement

Training / Education

Work-life Balance Programs

Flexible Working Hours

International Placements

Additional Annual Leave

Paid Overtime

Strategies for Retaining Qualified Staff (%)

Ranked by Very Effective + Effective

Effort Needed to Train Staff (%)

To Reach the Desired Qualification Level

companies considering it takes high efforts. When companies

only do production, this proportion increases to 68%;

whereas when no production activity is involved it gets down

to 56.4% (difference of about 11.6 percentage points

between the two segments).8

Roles that require a substantial component of hard

knowledge are the most difficult to fill, with technical sales,

engineering / R&D, and technical service topping the ranking.

On the other hand, roles in administration, procurement,

finance, HR, IT, or marketing functions are not perceived as

being difficult to recruit.

Lack of sufficient professional skills together with salary

expectations remain the most commonly mentioned issues

about why positions are hard to be filled.

61.5 61.5 63.6 61.4

36.131.1 30.9 30.4

7.77.5 5.6

8.2

2015 2016 2017 2018

HighNeutralLow

Very difficult Difficult

Major problem Problem Small problem No problem n/a

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9. Additional HR Data

For the past three editions, a slow but steady downward

trend in turnover has been recorded, both for blue collar

workers as well as for white collar professionals.

Blue collar professionals, for whom the average turnover was

17.7% back in 2016, is now at 13.3%. White collar

professionals have moved from 12.8% average turnover in

2016 to 10.3% in 2018.

The slight improvement in turnover ratios comes hand in

hand with an increase in the average duration in the

company: 46.6 months for blue collar professionals (+5.5

months on average versus last year, or a 13.4% increase);

50.3 months for white collar professionals (+1.8 months or a

3.7% increase in comparison with 2017).

The last two HR metrics monitored, present almost an

identical picture in comparison with previous year results.

Average annual sick days and annual leave have barely

moved in 2018. Moreover, blue collar and white collar

professionals present almost identical average of annual sick

leave (3.5 and 3.6 days, respectively); concerning annual

leave, white collar professionals are at 11.7 days – slightly

above the 9.8 of the blue collar professionals.

14.7

41.1

3.59.6

13.3

46.6

3.59.8

10. Foreigners

77.2% of the companies contributing to the survey employ

foreigners (-3.6 percentage points below last year’s share).

This proportion varies notably across company size.

The highest proportion hiring foreigners is at the largest

companies (more than 250 employees). However, the

percentage of foreign hires over total headcount is the

lowest (2.4%).

On the other hand, 63.2% of companies with less than 50

employees hire foreign employers and foreign hires

represent 12.1% of total hires.

Turnover(in %)

White Collar Workers

Blue Collar Workers

20182017

Average duration in company

(months)

Average annual sick days

Average annual leave

12

48.5

3.411.510.3

50.3

3.611.7

Turnover(in %)

20182017

Average duration in company

(months)

Average annual sick days

Average annual leave

77.2

63.2

79.9

94.4

22.8

36.8

20.1

5.6

All Less 50 50-250 More 250

Average Percentage of Foreign Employees (%)

Overall Results and by Company Size

Share of Companies Employing Foreigners (%)

Overall Results and by Company Size

NoYes

48.0

24.9

3.3

33.7

31.3

11.1

Local Contract

Expat Contract

Project Based Contract

Most Common Type of Contracts for Foreigners (%)

Ranked by Very Common + Common

20182017

6.7

13.9

3.72.5

5.8

12.1

3.42.4

All Less 50 50-250 More 250

CommonVery Common

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Hire of Foreign Interns (%)

Options that Apply in Your Company

Evaluation of Visa Process (%)

9.7

30.1

38.1

15.8

6.35.9

34.636.8

15.8

7.0

SignificantlyImproved

Improved Unchanged Worsened SignificantlyWorsened

20182017

40.438.4

5.4

15.8

41.537.5

4.0

16.9

No Changes Replace Some Replace All Unknown

20182017

13.710.0

36.9

9.6

24.0

5.9

Use StudentVisa X1

Support of3rd Party

Do not needforeign intern

Do not hiredue to

administrativeburden

Do not hiredue to unclear

regulations

Other

2018

Future Plans for Positions Currently Held by Foreigners (%)

Intention to Replace with Local Staff

Hiring foreigners using a local contract is the most common

option, with 81.7% of companies declaring it very common or

common. That is about 11 percentage points higher than last

year.

When inquired about what companies plan in the future

when it comes to positions held today by foreigners, 4%

declare they intend to replace all positions with local staff.

The most common outcome though is that companies aren’t

planning any changes (41.5%) or only plan to replace some

foreigners with local staff (37.5%).

Obtaining visas for foreign staff is seen as a process that has

improved or significantly improved for 40.4% of the

respondents (very similar to last year’s 39.8%). There is,

however, a considerable share of 22.8% of companies that

see the visa process in a completely different light (22.1% in

2017), considering that it has worsened or significantly

worsened.

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39.0

5.39.0 9.8 10.4

3.97.9

5.1 4.2 5.3

63.222.2

14.6

East

North

South

27.3

25.711.8

7.5

7.5

6.8

4.68.7

11. About the Survey

This year’s data collection started a little earlier in order to

offer German Chamber members the final results in

September.

Overall, a total of 356 contributors, all exclusively members

of the German Chamber of Commerce in China, took part in

this year’s survey. Data was collected from 5th June to 20th

July 2018 via an online questionnaire accessible only by

email invitation. The final sample represents 15.4% of the

Chamber’s membership, making the results statistically

representative with a 4.8% margin of error for a confidence

level of 95%.

12. Profile of Companies and Contributors

As usual, the majority of contributions come from the

Yangtze River Delta area (63.2%), with Shanghai accounting

for 39.0% of it. North China represents 22.2%, where

Beijing accounts for almost half of those contributions;

finally, South China contributes to 14.6%.

By industry, machinery / industrial equipment and

automotive amount to 53.4% of the overall contributions

(47.4% in 2017).

By company size, there is an even split between less than 50

and 50 to 250 employees: 37.4% and 37.6%, respectively.

Industrial Distribution (%)

33.7

19.7

6.5

5.6

5.3

4.5

3.4

3.1

18.3

Machinery

Automotive

Consulting / Legal Services

Plastic / Metal Products

Electronics

Chemicals

Consumer Goods

Others

Medical Supplies

Regional Distribution (%)

Main Focus of Activity (%)

58.0

56.1

43.4

28.7

25.6

22.3

20.8

3.7

Sales & Marketing

Production

Services

Sourcing/ Procurement

Trading

Production-related Engineering

R&D

Others

Profile of Contributors (%)

Position of the Company Representatives Participating in the

Survey

General Manager

HR Manager

Other

Nationality of the Company Representatives

77.8

15.9

6.3

Chinese

German

Other nationality

37.4 37.6

25.0

Less 50 50-250 More 250

Company Size (%)

By Number of Employees

HR Specialist / Supervisor

C&B Specialist / Supervisor

HR Director

Finance Director / Manager

C&B Manager

TAI / KUN: Taicang and Kunshan; Other YRD: Other Yangtze River Delta areas; OtherPRD: Other Pearl River Delta areas



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13. Notes

1. The direct, positive relationship between expected wage

increases and company size that this year’s results

display is not a given one. For example, in the 9th Edition

of this report (2016/17) the relationship was exactly the

opposite: with smaller firms presenting the highest wage

increase (6.52%); mid-sized companies followed with a

6.27% wage increase; larger firms, those with more than

250 employees, presented the lowest wage increase

(6.01%).

2. The total cost per employee is defined in the

questionnaire as the gross base salary plus variable costs

such as social insurance, performance bonuses, cash

allowances and other benefits (taxes included). Monthly,

in RMB based, on a 40hr working week and a 12-month

year period. In turn, the gross base salary is defined as

basic monthly salary in RMB (taxes included) based on a

40hr working week and a 12-month year period.

3. Median: level of compensation that divides the number

of observations in two equal parts: 50% of the

observations have a compensation below that

represented by the median, and the other 50% have a

level of compensation above that of the median. The

other measure of central tendency presented in 4. Wage

levels is the average (or mean): the sum of all wages in

the data set divided by the number of observations. In

the next chapter (IV. Survey Results: Compensation Data)

we prefer to use the median over the mean since the

distribution of the total cost per employee is skewed,

meaning that the average loses its ability to represent a

central location for the data because it is dragged away

from that central point by the extreme values in the data

set. However, the median is not as strongly influenced by

extreme values making it a more reliable measure of

central tendency in this case.

4. By regional level, whether it is using the mean or the

median values as the base for comparisons, rankings by

compensation remain the same but for Suzhou and

Tianjin. If using the median, Tianjin is the 3rd highest

paying region (RMB 14,980); Suzhou is the 4th (RMB

14,655). When using the mean, they swap positions,

with Suzhou coming 3rd (RMB 23,839), and Tianjin 4th

(RMB 23,756).

5. It refers to industries for which there are at least 100

observations available, across the 39 different positions

surveyed that come from a minimum of 10 different

companies. Results for industries like tourism &

hospitality, IT or construction are not presented in this

report since they don’t meet this minimum sample size

requirement.

6. The percentage combines the mentions very common

and common.

7. In the questionnaire, companies are asked about their

main focus areas of activity in China. It is a multiple

response question that, among others, includes the

alternatives “Production” and “Production-related

engineering”. Based on the responses to this question

we have created the segments of companies that do not

do production and companies that only do production.

8. The specific results are as follow: efforts needed to train

staff for companies that only do production: high 68%,

neutral 26%, low 6%; efforts required to train personnel

for companies that do not do production: high effort

56.4%, neutral 34.2%, and low 9.4%.


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German Chamber of Commerce

in China | North China

0818 Landmark Tower 2,

8 Dongsanhuan (N) Rd.

Chaoyang, Beijing 100004

Tel. +86 10 6539 6688

[email protected]


in China | Shanghai

29F, Gopher Center

No. 757 Mengzi Road

Huangpu District | Shanghai 200023

Tel. +86 21 5081 2266

[email protected]


in China | South & Southwest China

Room 1903, Leatop Plaza

32 Zhu Jiang East Road

Tianhe District, Guangzhou 510620

Tel. +86 20 8755 2353

[email protected]

www.china.ahk.de/chamber

Boos t

Your

Bus iness !

The German Chamber of Commerce in China

The German Chamber of Commerce in China supports German companies

in their activities in China. Divided into the regional centers of Beijing,

Shanghai and South & Southwest China, it assists all together about 2,500

companies.

It is thereby one of the largest foreign chambers in China. The Chamber

offers a broad range of seminars, workshops and events to German

companies, in addition to access to an enormous network and assistance

with matters in relation to the local and regional government offices.

The Delegation of German Industry & Commerce (AHK)

Greater China

The Delegation of German Industry & Commerce Greater China is the key

representative body for German economic interests in China, working on

behalf of the German Federal Government. With offices in Beijing, Shanghai,

Guangzhou, Hong Kong and Taipei, the AHK represents German corporate

interests in Greater China and supports the expansion of German-Chinese

economic relations. The AHK is part of a network of more than 130 German

economic representations worldwide, which has been active abroad for

more than 150 years. The first office in the Greater China region was

opened in 1981 in Taipei.

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