China labour costs still competitive

Recent data comparing labour costs in Asia places China in the middle. With Bangladesh as the lowest wage country and Japan as the highest wage country, China ranks slightly above the Philippines but still below Malaysia.

It needs to be mention that the chart only mentions minimum wage and is not industry specific. Few workers in the garments industry in China are working at minimum wage, and many earn even double the minimum wage. When calculating labour costs, we calculate labour costs per unit. That means productivity is a key factor. If for example labour costs in the philippines are 20% lower but productivity is 30% lower, it would make the labour costs per unit  actually 10% higher than in China. Productivity depends on many factors. Management, logistics, infrastructure, regulations, efficiency in the work shop and abundance of skilled workers.

Buyers looking at low wage countries sometimes overlook the fact the labour costs are not the only factor for buying an competitive product. Materials costs and taxes can be much higher in countries with low labour costs because many materials need to be imported from……… China! China is still a one stop shop where you can find your entire supply chain at one place, still at very competitive pricing.