Outlook on labor cost development in China (Shanghai region in particular) as a road map for multinational corporations (MNCs)

Challenges for MNCs in Shanghai

Research Paper (postgraduate) , 2013 , 43 Pages , Grade: 1,3

Business economics - Investment and Finance

Many observers, business people and in particular investors see labor cost developments in China as one of the main challenges for their Chinese subsidiaries. Especially in the East-coast region around Shanghai, labor cost has risen significantly within the last decade. For investors having subsidiaries in this region, the outlook on labor market might not look much brighter than it used to.
Nevertheless, this development results from the impressive shift China has made in such a short period of time. China is now undergoing one of the most massive urbanizations in human history, which becomes nowhere more evident than in Shanghai. The population of this city is officially by now almost 24 million and is forecasted to rise to 30 million by 2020.
Consequently, especially low-tech manufacturing plants in the Shanghai region suffer on the one hand from increasing labor cost, on the other hand from the fact that the government changed its focus to higher value-added industries with less pollution output in order to increase the living standard and quality of the population. In general, this trend means that Shanghai attracts high value-added industries such as Finance and Technology since the city offers well educated workforce as well as for sure an amazing flair attracting multinational corporations (MNC).

The aim of this assignment is to give a precise short-term outlook on the labor cost development in China, which can be used by (potential) investors or MNCs having their subsidiary in the country. This short-term outlook will be extended by a mid and long-term prognosis, taking into account different regional wage developments as well as the macroeconomic performance of China. The prognosis should give the previously described target group a valid document for further planning matters.

Table of contents

List of tables and figures

List of abbreviations

1. Preface
1.1 Problem statement
1.2 Objective
1.3 Research background / methodology

2. Status quo of general labor cost conditions (2011)
2.1 Average wage development within China
2.2 Minimum wage rates within China in
2.3 Government issued wage guidelines
2.4 Unionization and collective bargaining
2.5 Inflation

3. Short-term outlook on labor cost development (2012-2013) 11
3.1 National wage levels
3.2 Regional comparison
3.3 Wage situation by company size and business purpose
3.4 Wage situation by industry

4. Mid-term prognosis on labor cost development (FC 2015) 23
4.1 National wage levels
4.2 Regional comparison – base case
4.3 Regional comparison – moderate growth scenario
4.4 Regional comparison – slow growth scenario

5. Challenges for multinational corporations (MNCs) in Shanghai
5.1 Urban development of Shanghai
5.2 Compensation of increasing labor cost with higher productivity
5.3 Westward migration of MNCs

6. Critical appraisal and outlook

List of literature

Appendix

• College: Nürtingen University (Campus of Finance)
• Course: Global Markets
• Grade: 1,3
• Author: B.A. Markus Fost (Author)
• Publication Year: 2013
• Pages: 43
• Catalog Number: V211216
• ISBN (eBook): 9783656393177
• ISBN (Book): 9783656393528
• Language: English
• Tags: China, Lohnkosten, Shanghai, Labor cost, Challenges, road map, MNC, Outlook, Studie, Gehaltsentwicklung, Asien, multinational, corporation, urban development, westward migration