China Faces Labour Shortage

This article appeared in the Asia times on May 16th, 2007. it discusses the labour shortages and unemployment which China is beginning to see and will continue to see in the future.

BEIJING - The supply of low-cost labor, widely considered to be fueling China's sizzling economy, could start drying up as early as 2010, a report warns.

One of the biggest reasons for the potential shortage is that the rural labor force may not be as large as previously thought, says the report issued by the Chinese Academy of Social Sciences.

"China is moving from an era of labor surplus into an era of labor shortage," the report cautions. One of the architects of the report, however, said it doesn't necessarily mean the country will lose the advantage it enjoys in the international market because of its labor-intensive products.

Experts believe the turning point, when the new labor force will fail to meet demand, could be as close as three years. This will trigger a general increase in wages, the report says.

The number of redundant workers below the age of 40 in rural areas is only about 52 million in absolute terms, far fewer than the estimated 100 million to 150 million, said Cai.

The transformation of the population under the "one-child" policy and economic and social development is complete, he said, and the country has now entered a period of low birth and death rates, with a very gradual increase in population. The effect of this will be a gradual labor shortage in the country.

The recent labor shortage in the Pearl River Delta region, a hub for labor-intensive industries, is a sign of this trend, said Cai. "The phenomenon is spreading gradually from coastal areas to central China or even some provinces that boast huge labor surpluses."

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