Manufacturing Labor in China

Over the past 30 years, China has experienced unprecedented levels of economic growth and is now the world’s largest economy in terms of purchasing power parity, as well as the world leader in the manufacturing of mass-produced goods (World Bank, 2015). Much of this rise can be attributed to the capitalization of China’s vast manufacturing sector, characterized by the establishment of special economic zones (SEZs) and a cheap, abundant labor force. The value of the labor force largely rests in workers’ willingness to move away from their families to the production centers along China’s east cost, knowing that their time on the factory floor was a step forward for the next generation.

More recently, however, China has begun a new economic transition from a manufacturing-based to a service-based economy. In 2015, the tertiary sector climbed to 50.5% of China’s total gross domestic product (GDP), while industry continued to fall to 40.5% of GDP (World Bank, 2016). This economic transition has manifested through the central government’s targeted policies to move China’s manufacturing sector up the value chain. China’s leaders aim to foster an policy shift from “made in China” to “created in China”, promoting new, innovative, highly-efficient manufacturing techniques to produce goods of the highest quality.

China’s economic transition has led to wide-ranging economic impacts and uncertainty in the nature of industry, work, and available opportunities in the market. Labor changes in particular have functioned as both a driving force and a resulting product of this industry-wide paradigm, especially in terms of workforce empowerment.

University graduates and higher-skilled workers now replace the preexisting manufacturing labor force as the lifeblood to China’s future economic development. More educated workers are better able to take up these higher-skilled jobs, while also possessing increased personal ambition and expectations. Incidentally, the result is a class of individuals with increased choice who no longer view traditional manufacturing jobs as viable career paths, instead turning to the service sector for a more career-orientated, less tedious working environment. Meanwhile, the labor supply for manufacturing has diminished, leading to year-on-year wage increases reaching over 51000 RMB in 2015 (CBNS, 2016).

While low-end manufacturing jobs will continue to be a vital component among China’s labor demographics, regional and national labor changes will only grow in scale and significance over the next 10 years with the increased focus on skilled labor and the service sector.

This report addresses the changing economic and labor situation in China’s manufacturing sector, highlights current macro- and micro-level trends and driving factors behind the scenes, and outlines concrete actions for stakeholders and investors to prepare for in the future.

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