A rise in the minimum wage for parts of China has threatened to throw PC component suppliers into chaos, as manufacturers question their reliance on cheap labour.
In a bid to offset domestic inflation, a number of provinces, such as Guangdong and Jilin, will up the wages for cheap labour on 1 January 2012. This has led to concerns that companies which have invested heavily in the area - in a bid to save on cheap labour - could run the risk of bankruptcy, with slowing demand worsening the situation.
According to Digitimes' sources, the situation is already difficult for many smaller firms which are being forced to shell out roughly 36 percent interest rates on underground loans. And, with banks unwilling to lend money, this means plenty face going under in the new year.
China has been synonymous with cheap labour over a number of years and has been the go to for cost-effective made products. Of course, with that comes notoriously appalling conditions and events like the suicides at Foxconn's factories. Indeed, another worker fell to her death on Sunday, though Foxconn claims it was accidental. Western mega-corporations such as Apple have come under scrutiny from human rights groups about their role in supporting conditions which would not exactly be condoned domestically.
However, as part of China’s ‘125’ five year plan, worker’s wages are going to head skywards, increasing by 84 percent compared to the 2010 average.
According to chip market analyst Malcolm Penn at Future Horizons, it is inevitable that investors would not be able to fill their pockets with incredibly low labour costs with any long term sustainability.
“It used to be cheaper in Japan and now it has moved over to China, and it could be anywhere after that,” he said, speaking with TechEye.
“Cheap labour is a myth and it goes from place to the next, you bleed it dry and then it will occur somewhere else," Penn continues. "When it is too expensive in China companies will go somewhere else, that is just the nature of economics.
“It is absolutely no surprise that it is becoming more expensive in China, the only people it is a surprise to is those going to whichever country is next to be used for cheap labour.”
According to a spokesperson for the World Socialist Web Site, rising food and housing prices have caused a situation in China where unrest is growing. Wage rises are a symptom in some of the most disaffected regions, such as Guangdong.
“There are growing social protests against these conditions. It is notable that it is the province of Guangdong that is raising its minimum wage.
“In June last year, Honda workers in the city of Fonshan struck for better wages and won.”
The WSWS believes that this has created a division among Chinese authorities over whether to enforce a clampdown reminiscent of Tiananmen Square, or to quell unrest with wage increases.
“China functions as the main cheap labour platform for world capitalism,” the spokesperson told TechEye. “Through methods of dictatorship, the Communist Party offers a super-exploited work force, with no industrial or political rights, over to the major corporations.
“The hypocritical posturing of Western governments on China’s human rights record is severely contradicted when one considers the increase in investment following the massacre of pro-democracy students and workers by government forces in Tiananmen square in 1989.”