Wages on the rise

Manufacturing wages in southern China's Pearl River Delta are expected to rise 9.2 percent this year, faster than the 7.6 percent rate of growth respondents reported for 2012 wages, Standard Chartered said in a report.

"The rise is partly policy-induced and partly a reflection of labor shortages," said Stephen Green, an economist with Standard Chartered.

Nearly 63 percent of respondents say minimum wage hikes have had at least some impact on the wages they pay, while 88 percent believe the current labor shortage is at least as bad as last year. Additional pressure is coming from stricter enforcement of companies' social insurance payments and wage negotiations with labor representatives, the report said.

Higher productivity helps to explain and absorb higher wages, according to the survey. The majority of companies say that output per worker has risen faster than wages, a fact they see as a positive sign.

When asked how companies are responding to labor shortages, a larger share of respondents than last year said they plan to relocate their factories by either moving inland or leaving China, but the majority still aim to boost capital investment to save on labor costs. Beyond wages, orders appear to be improving, and yuan appreciation expectations are back.

It was the fourth annual survey of its kind conducted by Standard Chartered in February after the Lunar New Year holiday. It received a record number of responses - 302, versus 204 last year - from manufacturers operating in the Pearl River Delta.

Labor shortages

Around 75 percent of respondents expect wages to increase by as much as 10 percent this year, similar to 2012.

However, wage pressures have clearly increased over the past 12 months. The latest survey showed a significant decline in those expecting no wage hikes this year and an increase in those expecting increases of more than 10 percent.

Average expectations are for a 9.2 percent increase for 2013, versus 7.6 percent in 2012. With official consumer price index inflation expected to rise to 4 percent in 2013, according to a Standard Chartered forecast, from 2.6 percent last year, real wages should rise at about the same pace. Of 302 respondents, 180 (60 percent) said they have already raised wages this year, by an average of 7.9 percent.

Only 36 respondents (12 percent) find it less difficult to find workers now than at this time last year. A total of 34 percent of respondents believe labor shortages have worsened since 2011, similar to last year's 35 percent

"Both results support our long-held view that there were no material job losses during last year's slowdown," said Green.

As the survey shows, 83 percent of surveyed companies are operating at 80 percent or more of their full workforce.