Monthly Labor Review • March 2011 39

Manufacturing in China

Judith Banister 

and

George Cook I

n 2006, China became the United 

States’ second-largest trading partner 

in manufactured goods behind Canada.1

 Only 4 years later, China surpassed 

Japan as the second-largest economy in the 

world.2 Because of China’s growing importance to the U.S. and global economies, 

there has been great demand for statistics 

about China’s manufacturing sector, particularly employment statistics and comparable labor-cost measurements. In 2005, 

the Bureau of Labor Statistics sponsored a 

baseline research project to assess the quality of China’s data on employment and labor 

compensation in manufacturing. The resulting report contains estimates of compensation costs in China’s manufacturing sector 

for the base year of 2002.3

The data sources and estimation procedures 

used in that original work have been the 

basis for updates through 2006 and, in this 

article, through 2008.4 Building on the 

baseline report and subsequent articles, this 

article documents and analyzes changes in 

China’s manufacturing employment and 

hourly labor compensation costs on the basis 

of official data through 2008 and anecdotal 

reports from China since then. 

The recent global economic crisis, which 

escalated rapidly in the second half of 2008, 

has contributed to jolting shifts in the manufacturing sector in the United States and 

China as well as many other developed and 

developing economies. Even so, China’s 

manufacturing employment continued to 

grow from a total of 97.91 million at the end 

of 2007 to 99.01 million at yearend 2008. 

Though manufacturing workers in China 

are earning more than ever before, average 

hourly compensation costs were only $1.36 

in 2008. China’s hourly compensation costs 

remain far below those of many of its East 

Asian neighbors like Japan ($27.80) and 

Taiwan ($8.68), but are roughly on par with 

those of others like the Philippines ($1.68).5

This article first reviews sources of data 

on China’s manufacturing sector and then 

presents recent trends in China’s employment and labor compensation in manufacturing through 2008. The article updates 

the previous BLS estimates of hourly earnings and hourly compensation costs in manufacturing and highlights ongoing changes 

for workers in China’s manufacturing sector. Comparisons of China’s hourly manufacturing compensation costs with those of 

other nations around the world, including 

the United States, India, and a number of 

Judith Banister is a senior 

consultant with Javelin 

Investments. She is 

the former head of the 

International Programs 

Center at the U.S. Census 

Bureau. Dr. Banister may 

be reached by email at 

judith_banister@yahoo.

com. George Cook is an 

economist formerly in the 

Division of International 

Labor Comparisons, 

Bureau of Labor Statistics.

China’s employment and compensation 

costs in manufacturing through 2008

Despite large increases in recent years, hourly compensation costs

 in China’s manufacturing sector remained only 4 percent of those 

in the United States in 2008; that year, hourly compensation costs 

rose to $1.36, as China’s manufacturing employment continued 

to increase despite the beginning of the global economic downturn
Manufacturing in China

40 Monthly Labor Review • March 2011

East Asian economies, also are included.

Available data sources

China’s published statistics on employment and wages 

in manufacturing do not meet international standards. 

No source of frequently published, official data provides 

nationwide employment and labor compensation statistics 

on Chinese manufacturing. To obtain reliable, annually 

updated, national employment and earnings numbers, data 

must be drawn from two sources. Data for formal, urban 

enterprises are collected and reported by the Ministry of 

Human Resources and Social Security (formerly called 

the Ministry of Labor and Social Security), while data 

for other manufacturing units —that is, town and village 

enterprise (TVE) data6—are compiled and reported 

by the Ministry of Agriculture. TVEs were originally 

established in China’s Maoist Communist period to give 

rural peasants and town dwellers jobs outside subsistence 

agriculture without any need for them to migrate to large 

cities. The primary purpose was rural industrialization 

in China, to prevent overurbanization of the population 

and massive urban slums. Because of this policy, almost 

two-thirds of China’s manufacturing workers are now 

employed in TVEs, while just over one-third work in 

urban units. 

The published annual data on China’s employment and 

wages in manufacturing are based on an annual reporting 

system from work units that originally reflected a planned 

Marxist economy and that emphasized urban data over 

rural data. In the decades from 1949 to the economic 

reforms beginning in 1978, essentially all industries in 

China’s cities were state owned and state run, and the 

government focused on documenting industrialization 

and progress in the cities. During that time, rural China 

was organized into collectives that owned and ran the 

TVEs; few data were collected from the collectives in the 

countryside. Today, there continue to be comparatively 

detailed yearly figures on employment and earnings in 

urban manufacturing units that are published in easily 

accessible statistical volumes.

In contrast, only a small number of labor-related 

statistics are published describing China’s large network 

of factories and small manufacturing units besides urban 

units. The majority of China’s manufacturing workers are 

employed in TVEs, yet each year only two official relevant 

figures are published about them: the total number of 

manufacturing employees who work in TVEs and the 

total annual wage bill for those manufacturing workers.7

Estimates for total employment and average hourly 

compensation costs for China’s manufacturing sector 

are constructed by combining the ample urban data 

with the less plentiful figures on TVE manufacturing. 

Important gaps in the TVE data are filled by estimating 

nonwage components of labor compensation as well as 

the number of hours worked per year. These national 

estimates for China cannot be considered as robust as the 

manufacturing statistics for most developed economies, 

but the accumulated evidence to date supports the general 

validity of the BLS calculations on China’s employment 

and labor compensation in manufacturing.8

Total yearend manufacturing employment

Total yearend manufacturing employment in China is 

derived by adding manufacturing employment in urban 

units to manufacturing employment in TVEs (table 1). 

These figures are far higher than the official data on total 

manufacturing employment, which were last published in 

2002. The official published yearend total of 83.07 million 

workers for 2002 comprised 29.81 million manufacturing 

employees in urban units, 45.06 million manufacturing 

employees of registered manufacturing enterprises outside 

of areas classified as urban (the more formal component of 

TVE manufacturing), and another 8.21 million informal 

manufacturing workers said to be located in urban areas 

but operating outside of established enterprises.9 The sum 

of manufacturing employment from urban units (29.81 

million) and TVEs (70.87 million) was 100.67 million 

at yearend 2002, more than 17 million higher than the 

official reported number (table 1).

In this article, total manufacturing employment for 

China is calculated by combining TVE (rather than 

“rural”) manufacturing employment with manufacturing 

employment in urban units. This procedure is necessary in 

order to calculate annual updates for China’s nationwide 

employment and labor compensation in manufacturing. 

The reasons that the procedure is necessary are twofold. 

First, though yearly data are published on employment 

and wages in urban manufacturing units, China’s 

National Bureau of Statistics stopped publishing a 

number for “rural” manufacturing employment after 

2002, as mentioned earlier. Second, China’s official 

sources have never published corresponding wage data 

for “rural” manufacturing employees, whereas annual 

earnings data are published for TVE employees. For these 

reasons, TVE data from the Ministry of Agriculture are 

used to represent groups other than urban units. 

Readers will note a sudden discontinuity in table 1 in the 

series for the total yearend manufacturing employment 
Monthly Labor Review • March 2011 41

Table 1. Yearend manufacturing employment in China, 1978–2008

[In millions]

Year

Reported total 

manufacturing 

employment

“Rural” 

manufacturing 

employment 

Manufacturing 

employment in 

urban units

Town and village enterprises 

(TVEs) employment

Urban units +TVE manufacturing 

employment

“Industry”1 Manufacturing Yearend Average

1978........................ 53.32 17.34 — 17.34 — — —

1979........................ — — — 18.14 — — —

1980........................ 58.99 19.42 — 19.42 — — —

1981........................ — — — 19.81 — — —

1982........................ — — — 20.73 — — —

1983........................ — — — 21.68 — — —

1984........................ — — — 36.56 — — —

1985........................ 74.12 27.41 — 41.37 — — —

1986........................ 80.19 31.39 — 47.62 — — —

1987........................ 83.59 32.97 — 52.67 — — —

1988........................ 86.52 34.13 — 57.03 — — —

1989........................ 85.47 32.56 — 56.24 — — —

1990........................ 86.24 32.29 53.61 55.72 51.50 105.10 —

1991........................ 88.39 32.68 55.01 58.14 53.73 108.74 106.92

1992........................ 91.06 34.68 55.67 63.36 58.56 114.23 111.49

1993........................ 92.95 36.59 55.27 72.60 67.10 122.37 118.30

1994........................ 96.13 38.49 54.92 69.62 64.34 119.26 120.81

1995........................ 98.03 39.71 54.93 75.65 69.92 124.85 122.05

1996........................ 97.63 40.19 53.44 78.60 72.65 126.09 125.47

1997........................ 96.12 40.32 51.30 61.49 56.84 108.13 117.11

1998........................ 83.19 39.29 38.26 73.34 67.79 106.05 102.03

1999........................ 81.09 39.53 35.54 73.95 68.35 103.90 104.97

2000........................ 80.43 41.09 33.01 74.67 69.01 102.02 102.96

2001........................ 80.83 42.96 30.70 76.15 70.38 101.08 101.55

2002........................ 83.07 45.06 29.81 76.68 70.87 100.67 100.88

2003........................ — — 29.80 78.56 72.73 102.54 101.61

2004........................ — — 30.51 81.61 75.68 106.19 104.36

2005........................ — — 32.11 84.52 78.48 110.59 108.39

2006........................ — — 33.52 85.03 79.11 112.63 111.61

2007........................ — — 34.65 68.37 63.26 97.91 96.65

2008........................ — — 34.34 69.85 64.67 99.01 98.46

1

 This is a translation of the Chinese “gongye,” which refers to manufacturing, mining, and the production and supply of electricity, gas, and water. 

NOTE: Dashes indicate data not available. There is a long time series 

for TVE “industry” (manufacturing, mining, and utilities) data, but separate 

reporting of the manufacturing component of TVE industry began only in 

2002. For the purpose of constructing a longer time series, TVE manufacturing employment during each of the years 1990–2001 is assumed to be 

92.4 percent of TVE industry employment as calculated with the published 

figures for 2002. Manufacturing employment in urban units has been published for 1994–2008. Figures for years before 1994 are estimated by using 

the trend found among urban “staff and workers” in manufacturing, a subgroup that accounts for 99 percent of urban manufacturing employees between 1994 and 1997. There is a break in the series for TVE manufacturing 

and “industry” employment in 1997, 1998, and 2007, and there is therefore 

also a break in the series for manufacturing employment in urban units and 

SOURCES: Data for 1978–2006 are taken from Erin Lett and Judith Banister, “China’s manufacturing employment and compensation costs: 2002–

06,” Monthly Labor Review, April 2009, p.32; China National Bureau of Statistics and China Ministry of Human Resources and Social Security, compilers, 

China Labor Statistical Yearbook 2009 (Beijing, China Statistics Press, 2009), 

p. 12; China Ministry of Agriculture, China Agriculture Yearbook, 2008 [in Chinese] (Beijing, China Agriculture Press, 2008), p. 232; China Ministry of Agriculture and China TVE Yearbook Editorial Committee, editors, China Village 

and Town Enterprise Yearbook, 2009 [in Chinese] (Beijing, China Agriculture 

Publishing House, 2009), p. 99.

TVEs (yearend and average) for the same years. There is a break in the series 

for urban units manufacturing employment in 1998, and therefore also in 

the series for manufacturing employment in urban units and TVEs (yearend 

and average) for the same year.

(comprising urban units and TVEs). The yearend total was 

increasing from 2002 through 2006, likely representing a 

real trend of rising manufacturing employment in China. 

Then, the total number dropped by about 15 million from 

2006 to 2007. Table 1 shows that there was no apparent 

disruption in urban units’ employment figures and that 

the entire decline came from TVE employment. The employment and earnings tables for TVEs in the China Labor Statistical Yearbook 2008 include a footnote indicating 

that official statistical organizations decided to drop self-
Manufacturing in China

42 Monthly Labor Review • March 2011

employed workers from the TVE manufacturing employment series for 2007 and subsequent years. 10 Because of 

the change, the TVE employment series showed a drop of 

16 million from yearend 2006 (79.11 million) to yearend 

2007 (63.26 million). This numerical change is not part 

of a real trend but instead constitutes a break in the series. 

Breaks in series are not unfamiliar in Chinese manufacturing employment data; similar breaks can be seen in 

TVE data from 1996 to 1998 and in data on urban units 

from 1997 and 1998.11 Despite the statistical breaks, it is 

still clear that the actual trend for the whole decade from 

1999 to 2008 is that TVE manufacturing employment increased every year from yearend 1998 to 2006 and that 

the rising trend continued (after the most recent change 

in statistical concepts) from yearend 2007 to yearend 

2008 (table 1).

From yearend 2007 to yearend 2008, China’s total 

manufacturing employment (no longer including selfemployed manufacturing workers) increased by 1.1 million, from 97.91 million to 99.01 million, but the rise 

in manufacturing employment was all in TVEs. Urban 

manufacturing units registered a drop in employment of 

311,000 over the same period (tables 1 and 2). 

Table 2 shows annual employment in urban manufacturing units from 2002 through yearend 2008 by subsector. 

From 2003 through 2007, total manufacturing employment in urban units rose every year. A few urban manufacturing subsectors had declining employment numbers 

Table 2. Urban manufacturing employment in China, by subsector, 2002–08 

Urban manufacturing subsector 2002 2003 2004 2005 2006 2007 2008

Total manufacturing employment in urban units... 29,807,492 29,804,919 30,508,231 32,108,988 33,516,145 34,653,607 34,342,617

Food processing........................................................................... 977,439 949,907 981,935 1,085,463 1,129,293 1,160,754 1,151,151

Food product manufacturing................................................... 621,757 657,164 673,822 712,837 747,609 775,192 768,145

Beverage manufacturing.......................................................... 740,250 749,406 710,610 711,048 730,770 753,938 771,152

Tobacco processing..................................................................... 233,485 222,476 200,184 184,255 177,911 189,851 200,844

Textiles.............................................................................................. 2,841,565 2,718,148 2,654,621 2,802,744 2,849,154 2,648,527 2,528,889

Garments and other fiber products....................................... 1,336,191 1,390,683 1,671,406 1,776,319 1,984,645 2,045,114 2,061,718

Leather, fur, down, and related products............................ 578,590 635,176 703,199 872,254 953,419 991,024 931,680

Timber processing, and bamboo, cane, palm, and 

straw products............................................................................ 267,666 294,322 312,231 328,389 349,580 352,468 304,296

Furniture manufacturing............................................................ 180,484 189,110 231,098 296,728 327,124 367,141 332,783

Papermaking and paper products.......................................... 592,400 574,859 561,654 589,588 602,266 607,156 611,053

Printing and record medium reproduction........................ 493,497 477,071 454,347 427,607 420,109 416,352 410,422

Stationery and educational and sporting goods.............. 294,636 332,826 353,672 392,394 444,470 473,133 436,533

Petroleum processing and coking products...................... 565,505 525,522 507,916 552,062 554,829 624,946 604,204

Chemical raw materials and products.................................. 2,213,256 2,172,951 2,117,999 2,130,712 2,129,860 2,159,162 2,155,118

Medical and pharmaceutical products................................ 844,857 891,993 896,412 930,402 926,623 925,652 959,865

Chemical fibers manufacturing.............................................. 263,378 204,733 207,241 207,405 213,091 222,331 211,078

Rubber products.......................................................................... 377,633 375,154 387,495 383,041 400,682 431,887 438,408

Plastic products............................................................................ 606,800 629,700 664,683 728,828 776,708 819,606 789,435

Nonmetal mineral products.................................................... 2,116,034 2,092,946 2,095,421 2,141,121 2,111,943 2,050,602 1,936,335

Smelting and pressing of ferrous metals............................ 1,900,648 1,900,466 1,845,205 1,872,455 1,877,029 1,933,406 1,894,175

Smelting and pressing of nonferrous metals.................... 755,646 790,666 789,552 792,309 811,151 885,374 921,110

Metal products............................................................................. 897,455 809,559 854,134 951,703 1,001,597 1,083,064 1,066,083

Ordinary machinery manufacturing..................................... 1,921,315 1,884,852 1,900,869 1,934,990 1,969,987 2,091,054 2,046,922

Special purpose equipment manufacturing...................... 1,400,594 1,661,521 1,627,336 1,627,277 1,712,683 1,732,787 1,772,950

Transportation equipment manufacturing......................... 2,319,421 2,316,516 2,314,390 2,429,167 2,570,589 2,631,544 2,745,303

Electrical equipment and machinery................................... 1,441,399 1,414,331 1,568,808 1,668,224 1,789,185 1,903,513 1,977,827

Electronics and telecommunications.................................... 1,623,783 1,825,847 2,054,772 2,376,539 2,660,945 3,042,747 3,046,676

Machinery for cultural activity and office work................ 464,762 553,854 581,439 585,202 641,771 681,405 653,913

Other manufacturing.................................................................. 601,416 536,188 563,466 593,960 632,775 632,535 588,349

NOTE: The data in this table refer only to urban manufacturing employment. The subsectors listed here do not sum to the total manufacturing in 

urban units, but the difference between total manufacturing employment 

and the sum of manufacturing employment in the listed industries is less 

than 2 percent in all years.

SOURCES: Data for all years were collected by the China National Bureau 

of Statistics and China Ministry of Human Resources and Social Security. 

Data for 2002 through 2004 are from Erin Lett and Judith Banister, “Labor 

costs of manufacturing employees in China: an update to 2003–04,” Monthly Labor Review, November 2006, p 45. Data for 2005 are from China Labor 

Statistical Yearbook 2006 (Beijing, China Statistics Press, 2006), pp. 185–200. 

Data for 2006 are from China Labor Statistical Yearbook 2007 (Beijing, China 

Statistics Press, 2007), pp. 203–218. Data for 2007 are from China Labor Statistical Yearbook 2008 (Beijing, China Statistics Press, 2008), pp. 179–194. 

Data for 2008 are from China Labor Statistical Yearbook 2009 (Beijing, China 

Statistics Press, 2009), pp. 193–208.
Monthly Labor Review • March 2011 43

in several or all of those years (for example, printing and 

record medium production, and tobacco processing), but 

most urban manufacturing subsectors were hiring steadily 

throughout much of the period from 2002 to 2007. Then 

the global economic downturn caused shrinking markets 

for Chinese exports in the United States and Europe,12

resulting in a decline in employment in the urban Chinese manufacturing sector in 2008. The largest reductions in urban manufacturing employment from 2007 to 

the end of 2008 were in textiles; nonmetal mineral products; leather, fur, and down products; timber and bamboo processing; ordinary machinery manufacturing; and 

smelting and pressing of ferrous metals (table 2). Some of 

China’s manufacturing subsectors appeared to be unaffected by the global downturn; in 2008, several industries within urban manufacturing added employees—for 

example, medical and pharmaceutical products, beverage 

manufacturing, tobacco processing (which previously had 

been reducing employment), garments and other fiber 

product manufacturing, smelting and pressing of nonferrous metals, special purpose equipment manufacturing, 

transportation equipment manufacturing, and electrical 

equipment and machinery manufacturing. These more 

resilient sectors may be those with a strong domestic 

Chinese market. This is demonstrated in the sales values 

of China’s domestic trade (wholesale and retail) in pharmaceuticals, beverages, tobacco, garments, vehicles, and 

household electrical appliances, which rose steeply from 

2007 to 2008 (after adjustments for price changes for 

these goods in Chinese yuan).13

Calculating compensation costs

Manufacturing employment is of course an important 

factor in understanding China’s international trade competitiveness, but it is critical to couple this information 

with labor costs. The following sections update previous articles from the Monthly Labor Review with hourly 

compensation data from 2007 and 2008. The estimates 

are based on the same statistical sources as the employment data constructed in the previous section and therefore reflect compensation for China’s total manufacturing 

employment—that is, the sum of employment in manufacturing urban units and employment in manufacturing 

TVEs. As with the employment data described earlier, 

both the Ministry of Human Resources and Social Security (urban units) and the Ministry of Agriculture (TVEs) 

publish an annual earnings figure that includes wages, 

bonuses, and allowances paid to employees in cash or in 

kind. Aggregate earnings data for urban units and TVEs 

are combined to construct an estimate of direct labor costs 

in China’s manufacturing sector.14

Direct labor costs are combined with nonwage compensation costs to attain total annual compensation costs 

for manufacturing workers in both TVEs and urban 

units. Annual compensation data are then divided by annual hours to create an estimate of hourly compensation. 

Hourly compensation is a preferred measurement of compensation costs across countries, because hours can vary 

widely from one country to another and hourly compensation data account for that. The following two sections 

respectively discuss how estimates for hours worked and 

nonwage compensation costs are derived.

Hours worked

A detailed description of the methods used to calculate 

the original 2002 estimates of hours worked for China 

can be found in Judith Banister’s August 2005 Monthly 

Labor Review article.15 For the 2002 estimate of hourly compensation costs in China’s manufacturing sector, 

the annual number of hours that urban manufacturing 

employees worked was derived from the Ministry of Labor’s labor force survey. In 2002, the Ministry of Labor 

published two weekly hours-worked estimates for urban 

areas—one referring to a week in spring and the other 

referring to a week in autumn. These two estimates were 

averaged and then adjusted to an annual basis by using an 

estimate of the average number of weeks worked per year 

by urban manufacturing employees.16 For 2003 and beyond, hours-worked data for the spring reference period 

have not been published. The estimates of hours worked 

by urban employees for these years are based on percent 

changes in the number of hours worked in the autumn 

reference period relative to the same reference period in 

the previous year. These percent changes are then applied 

to the previous year’s annual-hours-worked estimate to 

derive an estimate of annual hours worked from 2003 

through 2008.

The published data on average weekly hours worked in 

China’s urban manufacturing sector at the beginning of 

November each year show a decrease from 50.4 hours per 

week in 2006 to 47.9 hours per week in 2008.17 Because 

there are no published data to update the estimate of 

hours worked by TVE manufacturing employees, the percent changes used for urban areas are applied to the 2002 

TVE annual hours worked estimate for each of the subsequent years. For the purposes of this article, from 2003 

onward, data on hours worked by both urban and TVE 

employees have been estimated on the basis of changes in 
Manufacturing in China

44 Monthly Labor Review • March 2011

the number of hours worked in the autumn reference period relative to the same reference period in the previous 

year from China’s urban labor force survey. These percent 

changes are then applied to the previous year’s annualhours-worked estimate to derive an estimate of annual 

hours worked for the year in question.18

Nonwage compensation costs

In order to estimate total compensation costs for China’s 

manufacturing employees, employer payments for social benefits such as workers’ compensation, unemployment insurance, medical insurance, and old-age pension 

funds must be added to the published earnings figures. 

For urban establishments, the relevant data for calculating social benefits as a percentage of total earnings are 

from a survey that China’s Ministry of Labor conducted 

with reference to 2002. Social benefits as a percentage 

of total earnings for TVE employees, on the other hand, 

was based on a survey of large manufacturing enterprises 

in Nanjing Municipality for the years 1994–2001 as well 

as assumptions about the level of benefits in large versus 

small establishments and between enterprises located in 

suburban areas and those in rural areas. The results of 

these surveys were used to construct the original 2002 

estimates of China’s manufacturing compensation costs.19

The authors have been unable to find published data from 

any subsequent surveys of urban establishments or busiTable 3. Estimated compensation costs of manufacturing employees in China, 2007–08

Category of manufacturing

Average 

number of 

employees 

(in millions)

Annual 

earnings 

per employee

(in yuan)

Annual compensation

 per employee

Monthly compensation 

per employee

Hourly compensation 

per employee

yuan U.S. dollars yuan U.S. dollars yuan U.S. dollars

2007

Urban units and TVEs (town and 

village enterprises)........................ 96.65 14,382 18,948 2,491 1,579 208 8.06 1.06

Urban units..................................... 34.08 21,144 32,519 4,276 2,710 356 13.89 1.83

TVEs................................................... 62.56 10,698 11,554 1,519 963 127 4.89 0.64

2008

Urban units and TVEs...................... 98.46 16,367 21,593 3,108 1,799 259 9.48 1.36

Urban units..................................... 34.50 24,404 37,533 5,402 3,128 450 16.53 2.38

TVEs................................................... 63.96 12,033 12,995 1,870 1,083 156 5.67 0.82

NOTE: Total compensation costs are 1.538 times earnings for urban 

workers and 1.080 times earnings for TVE workers. U.S. dollars are calculated at the prevailing market exchange rate: 7.6058 yuan = 1 U.S. dollar in 

2007 and 6.9477 yuan = 1 U.S. dollar in 2008. 

SOURCES: Employment data are from table 1 of this article. Earnings 

data for 2007 are from China National Bureau of Statistics and China Ministry of Human Resources and Social Security, compilers, China Labor Statistical Yearbook 2008 (Beijing, China Statistics Press, 2008), p. 179; and China 

Ministry of Agriculture, China TVE Yearbook Editorial Committee, eds., China Agricultural Yearbook 2008 [in Chinese] (Beijing, China Agriculture Press, 

2008), p. 233. Earnings data for 2008 are from China National Bureau of 

Statistics and China Ministry of Human Resources and Social Security, compilers, China Labor Statistical Yearbook 2009 (Beijing, China Statistics Press, 

2009), p. 193; and China Ministry of Agriculture, compiler, China Village and 

Town Enterprise Yearbook 2009 [in Chinese] (Beijing, China Agriculture Publishing House, 2009), p. 100.

nesses outside the cities in the aforementioned survey that 

would adequately update the information on labor compensation costs beyond the wage. Therefore, the ratio of 

employer expenditures for social benefits to direct labor 

costs is held constant, at the 2002 level, for the 2003–08 

estimates.

Results

Table 3 shows average annual earnings, adjusted by adding estimates for additional components of total labor 

cost, such as required social insurance payments. The 

table also displays annual, monthly, and hourly compensation figures in both yuan and U.S. dollars, calculated 

at the market exchange rate for each year. Employment 

in Chinese manufacturing averaged 96.65 million during 

2007, rising to an average of 98.46 million during 2008. 

Average yearly earnings (the basic wage in cash and in 

kind) totaled 14,382 yuan for 2007 and 16,367 yuan in 

2008 (table 3).

The earnings data for TVEs (table 4), like the employment data discussed earlier, include a break in series 

caused by the exclusion of the self-employed after 2006. 

Because of this break, earnings data from before 2007 for 

total manufacturing and TVEs are not directly comparable to data from 2007 and beyond.20 This recent statistical 

change improves the quality of TVE data by creating data 

that are more comparable with data for Chinese urban 
Monthly Labor Review • March 2011 45

1

 Before 2007, self-employed workers were included in TVE manufacturing data; since 2007, these workers have been excluded. This causes a break 

in 2007 in the series for hourly compensation in TVEs and in the series for 

hourly compensation in both urban units and TVEs.

NOTE: All figures are nominal. Exchange rate calculations were done at 

the market exchange rate for the year in question.

SOURCES: Table 3 of this article; and Erin Lett and Judith Banister, “China’s 

manufacturing employment and compensation costs: 2002–06,” Monthly 

Labor Review, April 2009, p. 35.

Table 4. Estimated hourly compensation costs of manufacturing employees in China, 2002–08

Category of manufacturing

Hourly compensation per employee

yuan

2002 2003 2004 2005 2006 2007 2008

Total for urban units and TVEs1....................................................... 4.74 5.17 5.50 5.95 6.44 8.06 9.48 

Urban units............................................................................................ 7.87 8.86 9.86 10.63 11.73 13.89 16.53 

TVEs1........................................................................................................ 3.40 3.63 3.73 4.05 4.24 4.89 5.67 

U.S. dollars

2002 2003 2004 2005 2006 2007 2008

Total for urban units and TVEs........................................................ 0.57 0.62 0.66 0.73 0.81 1.06 1.36 

Urban units............................................................................................ 0.95 1.07 1.19 1.30 1.47 1.83 2.38 

TVEs.......................................................................................................... 0.41 0.44 0.45 0.49 0.53 0.64 0.82 

units, as well as with data from other countries in the BLS 

international hourly compensation series. The data for the 

urban units in China remain comparable with one another over the entire series. 

Hourly compensation growth rates in China’s manufacturing sector have been rising steadily, and comparatively 

quickly. Consider that, from 2002 to 2008, hourly labor 

costs in the manufacturing sector in the United States increased by 19 percent, while the corresponding figure in 

China grew 100 percent.21 The following section explores 

some of the contributing factors to rising labor costs in 

Chinese manufacturing.

Rising compensation costs

Inflation in China has been substantial. Consumer prices 

in urban areas increased an average of 3.3 percent annually from 2005 through 2008. Consumer prices in rural 

areas increased even more rapidly, at an average annual 

rate of 3.9 percent.22 Even after an adjustment for consumer price inflation, the rise in compensation costs for 

manufacturing workers in Chinese currency is real and 

rapid in urban manufacturing units. All earnings data 

calculated in this article are nominal values and therefore 

have not been adjusted for inflation.

One reason for the surging manufacturing labor compensation costs in China is the rising literacy, numeracy, 

and educational attainment of even unskilled and semiskilled employees from rural as well as urban areas, and 

even greater increases in the human capital embodied 

in skilled workers and high-talent employees.23 The increased education and skill level of Chinese workers has 

helped to increase labor productivity in China’s secondary 

industry, especially in manufacturing. Labor productivity 

in China’s secondary industry (which is primarily manufacturing, but also includes construction, mining, and 

utilities) has risen about 10 percent per year since 1991 

(4–26 percent each year over the 1991–2008 period), due 

to technological progress, increased capital investment, 

and rising human capital.24

Another reason for the surging cost of labor in Chinese 

manufacturing today is a new employment contract law 

(also called a labor contract law) that came into effect at 

the beginning of 2008.25 The law gives workers the right 

to have a signed labor contract, protects the working 

conditions and timely payment of wages to employees, 

limits overtime work, requires payments to compulsory 

social insurance schemes for employees, and makes it 

much more difficult to fire workers. This law, along with 

minimum-wage laws, appears to be strengthening the 

bargaining power of employees and contributing to wage 

increases, especially in foreign-owned factories where 

China’s authorities recently are tolerating strikes by 

workers.26 It is likely that the labor contract law will also 

cause the amount of social insurance paid by employers 

relative to wages to increase, but BLS has been unable to 

locate recent national-level data to quantify the effects of 

this law on nonwage compensation.

Reported manufacturing labor shortages

A third reason for rising compensation costs in China is 
Manufacturing in China

46 Monthly Labor Review • March 2011

the growing shortage of workers. In recent decades, employers became accustomed to having a seemingly unlimited supply of very cheap labor, and being able to insist 

on certain qualities in their workers.27 Through the turn 

of the millennium, China had an ample reserve supply of 

laborers, partly because young-adult farmers were moving 

out of agriculture into industry for the first time. Reports 

of emerging shortages of manufacturing workers began in 

the Pearl River Delta of Guangdong Province in about 

2003 and have since spread.28

From a macroscopic perspective, China, the world’s 

most populous country with the world’s largest labor 

force, seems an unlikely candidate for a labor shortage.29

In fact, the bulk of China’s population (73 percent) is in 

the cohorts considered to be of working age—that is, the 

cohorts with people at least 15 years of age but younger than 

65—providing a massive pool of potential employees and 

talent (chart 1).30 As of yearend 2008, China’s employed 

population was reported to be 775 million, constituting 

58 percent of the country’s total population.31 Of the 

population ages 15–64, 77 percent was employed, which 

is high from an international comparative perspective.32

Nevertheless, as shown in chart 1, most of China’s 

young-adult age groups are smaller than the groups in 

their late 30s and early 40s. In addition, the youth population ages 0–14 has shrunk to an unusually small proportion of the population for a developing country. Indeed, a 

key determinant of China’s paradoxically tightening labor 

market is low fertility. China’s family planning and onechild policies have significantly reduced fertility and kept 

it low during most years since the 1970s.

The tight labor situation in manufacturing was temporarily eased by the global economic crisis. In late 2008 

and early 2009, export markets for Chinese manufactured 

goods crashed because of the weak global economy. Large 

numbers of migrant manufacturing workers were suddenly laid off, and many of these workers moved back to 

the countryside.33 China’s government instituted a massive infusion of money to reinvigorate the economy.34

Export markets began to recover during 2009; renewed 

hiring followed. But now, manufacturing employers are 

reporting that they cannot get the rural migrant workers 

to return to urban units, and are having difficulty luring 

new employees as well. 

In response to the current labor shortages, manufacturing employers are raising wages, improving working conditions, hiring workers in a wider age range, increasing 

promised benefits, and generally doing what they can to 

attract enough workers. The tight labor market is therefore contributing to increasing labor costs in manufacturChart 1. Population of China, by sex and by age group, in millions, 2010

80 60 40 20 0 20 40 60 80

Men Women

Age group

85 and older

0–4

5–9

10–14

15–19

20–24

25–29

30–34

35–39

40–44

45–49

50–54

55–59

60–64

65–69

70–74

75–79

80–84

85 and older

0–4

5–9

10–14

15–19

20–24

25–29

30–34

35–39

40–44

45–49

50–54

55–59

60–64

65–69

70–74

75–79

80–84

Age group

NOTE: Data were compiled by the U.S. Census Bureau from public and 

private data sources. Values for 2010 are estimated on the basis of sampling 

done in previous years.

SOURCE: U.S. Census Bureau, International Database, 

www.census.gov/ipc/www/idb/
Monthly Labor Review • March 2011 47

ing.35 The next section will discuss the difference between 

hourly labor costs in urban units and those in TVEs and 

how the tightening labor market affects this relationship.

Compensation in urban units versus TVEs

A continuing feature of manufacturing labor compensation in China is the large and growing differential between average hourly compensation costs for employees 

in urban units and those for employees in TVEs. (Chart 

2 illustrates the differential in U.S. dollars.) By 2002, 

hourly labor compensation in urban units was 2.3 times 

the compensation in TVEs; as of 2008, even after the removal of the self-employed (a group with low wages overall) from the TVE series, hourly labor compensation in 

urban units had jumped to 2.9 times that in TVEs. (See 

the compensation data in Chinese yuan in table 4).36 One 

key reason for this increasing disparity is restrictions on 

geographical labor mobility. It remains difficult for rural laborers to move from the villages to the cities and 

reestablish their families and households there, a factor 

contributing to perceived labor shortages in the urban areas. There are legal, administrative, informational, financial, educational, social, housing, and other formal and 

informal barriers to permanent rural-to-city migration.37

Therefore, labor shortages are more acute in the cities, 

driving up wages. 

Because of China’s strict family planning and onechild policies, most cohorts of workers that have entered 

China’s labor force since the beginning of the 1990s have 

been much smaller than the cohorts now in their late 

30s and early 40s (chart 1).38 To meet labor demand in 

the cities, employers are utilizing the city-born supply of 

young adult workers as well as drawing rural-to-urban 

migrant workers on a steady basis.

Villages throughout China report that most of the 

young adults who want to migrate out of the village 

for nonagricultural work have already done so. Though 

China has hundreds of millions of workers, they are now 

becoming more demanding about what jobs they pursue 

and where. If potential labor migrants are not impressed 

with what they have experienced or what they hear about 

pay and working conditions in the urban factories, they 

may be unwilling to migrate over a long distance to take 

up such jobs.39

China’s official statistical publications report the average annual earnings per employee in urban units in each 

subsector of manufacturing (table 5). This is the basic annual wage, and does not include additional labor compensation costs such as required social insurance payments to 

 Chart 2. Average hourly compensation costs in urban units and TVEs (town and village enterprises) in manufacturing, in U.S. dollars, 2002–08

Cost Cost

$2.50

2.00

1.50

1.00

0.50

0.00

$2.50

2.00

1.50

1.00

0.50

0.00

2002 2003 2004 2005 2006 2007 2008

Urban units TVEs Total

NOTE: Break in series for total average hourly compensation and TVE 

average hourly compensation at 2007.

SOURCE: Table 4 of this article.
Manufacturing in China

48 Monthly Labor Review • March 2011

Table 5. Earnings in urban manufacturing units in China, by subsector, 2002–08

Urban manufacturing subsector

Average annual earnings per employee

(in yuan)

2002 2003 2004 2005 2006 2007 2008

All subsectors.................................................................................................. 11,152 12,671 14,251 15,934 18,225 21,144 24,404

Food processing................................................................................................... 7,965 8,727 9,607 11,214 12,955 14,869 17,428

Food product manufacturing.......................................................................... 10,064 11,157 12,360 13,408 15,292 17,533 20,586

Beverage manufacturing................................................................................... 9,619 10,746 12,174 13,506 15,382 18,135 21,557

Tobacco processing............................................................................................. 23,744 27,143 34,688 42,355 46,089 52,418 60,200

Textiles..................................................................................................................... 7,268 8,079 9,038 10,531 12,035 13,968 16,284

Garments and other fiber products.............................................................. 9,066 10,090 11,381 12,512 14,349 16,924 18,711

Leather, fur, down, and related products.................................................... 9,108 9,883 10,964 12,497 14,415 16,263 18,228

Timber processing, and bamboo, cane, palm and straw products.... 7,339 7,879 8,801 10,033 11,290 13,212 15,699

Furniture manufacturing................................................................................... 8,881 9,501 10,808 12,639 14,684 16,871 20,215

Papermaking and paper products.................................................................. 8,668 10,067 11,232 12,580 14,599 16,731 19,359

Printing and record medium reproduction................................................ 10,863 11,707 13,409 14,984 16,820 19,350 22,603

Stationery and educational and sporting goods..................................... 10,390 11,432 12,183 13,075 15,015 16,603 18,268

Petroleum processing and coking products............................................... 17,357 20,733 22,951 25,494 28,335 31,614 35,343

Chemical raw materials and products........................................................... 10,359 12,129 13,729 15,770 18,475 21,835 25,249

Medical and pharmaceutical products......................................................... 13,207 14,556 15,652 17,170 19,104 21,595 24,828

Chemical fibers manufacturing....................................................................... 11,404 12,562 13,804 15,484 16,964 19,775 21,716

Rubber products................................................................................................... 10,055 11,024 12,470 14,233 16,251 18,994 21,843

Plastic products..................................................................................................... 10,131 11,317 12,584 13,661 15,455 18,078 20,886

Nonmetal mineral products.............................................................................. 8,123 9,173 10,394 11,540 13,403 15,715 18,523

Smelting and pressing of ferrous metals..................................................... 15,032 17,989 21,074 24,030 26,999 30,786 34,482

Smelting and pressing of nonferrous metals............................................. 12,491 13,661 15,285 17,408 20,543 24,060 26,358

Metal products...................................................................................................... 10,075 11,073 12,451 15,061 16,287 18,894 21,757

Ordinary machinery manufacturing.............................................................. 10,668 12,777 14,549 16,628 19,332 22,854 26,284

Special purpose equipment manufacturing.............................................. 10,406 12,040 13,985 16,228 19,103 22,232 26,394

Transportation equipment manufacturing................................................. 14,409 16,313 18,485 20,204 22,990 26,922 31,658

Electrical equipment and machinery............................................................ 12,405 13,435 14,797 16,438 18,533 21,141 24,769

Electronics and telecommunications............................................................ 17,636 18,922 20,428 21,213 24,119 26,934 29,915

Machinery for cultural activity and office work......................................... 12,720 15,044 16,543 17,644 21,933 23,669 27,182

Other manufacturing.......................................................................................... 8,781 10,049 11,334 12,789 14,392 16,479 19,017

NOTE: The data in this table refer only to the earnings of manufacturing employees in urban units. Within each subsector, rural manufacturing 

workers likely have lower earnings than those shown here. The earnings 

figures in the table do not include required employer social insurance payments or other nonwage labor costs. All currencies represented in current 

values.

SOURCES: Data for all years were collected by the China National Bureau 

of Statistics and the China Ministry of Human Resources and Social Security. 

Data for 2002 through 2004 are from Erin Lett and Judith Banister, “Labor 

costs of manufacturing employees in China: an update to 2003–04,” Monthly Labor Review, November 2006, p 45. Data for 2005 are from China Labor 

Statistical Yearbook 2006 (Beijing, China Statistics Press, 2006), pp. 185–200. 

Data for 2006 are from China Labor Statistical Yearbook 2007 (Beijing, China 

Statistics Press, 2007), pp. 203–18. Data for 2007 are from China Labor Statistical Yearbook 2008 (Beijing, China Statistics Press, 2008), pp. 179–194. Data 

for 2008 are from China Labor Statistical Yearbook 2009 (Beijing, China Statistics Press, 2009), pp. 193–208.

municipalities. There was a surge in the average wage in 

every urban manufacturing subsector in 2007 and 2008, 

as shown in table 5. Broad and strong manufacturing 

earnings growth in China’s cities is fueled in large part 

by urban labor shortages, labor productivity growth, and 

rapidly rising educational attainment in the cities. Pressure to keep up with higher inflation rates in 2007 and 

2008 than in earlier years also is a major factor.

Even while domestic differences in Chinese labor costs 

have grown, China’s overall manufacturing labor compensation costs have risen every year, affecting China’s 

global competitiveness in manufacturing. The next section will explore how Chinese hourly compensation costs 

measured in U.S. dollars compare with costs in both developed and developing economies.

Compensation measured in U.S. dollars

Hourly manufacturing compensation costs in China are 

increasing at an even faster rate in U.S. dollars than in 

Chinese yuan. Hourly compensation costs expressed in 

a domestic currency (in this case, yuan) can show trends 

in labor costs within a country, but they do not allow for 

comparisons across countries. For this reason, table 4 

expresses Chinese compensation costs in both Chinese 

yuan and U.S. dollars.
Monthly Labor Review • March 2011 49

The exchange rate between the yuan and the dollar has 

become an important and at times contentious issue.40

During 2002–04, the first 3 years of the hourly compensation series measured in this article, the Chinese central 

bank (the People’s Bank of China) pegged the yuan to the 

U.S. dollar at a rate of 8.28 yuan per dollar. Beginning 

in July 2005 the People’s Bank of China began a series 

of adjustments to the yuan–dollar exchange rate. Initially 

the new rate was set at 8.11 yuan per dollar with some 

small fluctuation allowed; later, the yuan was pegged to a 

basket of currencies instead of strictly to the U.S. dollar, 

allowing even further fluctuation between the yuan and 

the dollar.41

In 2008, the most recent year in the Chinese hourly 

manufacturing compensation series, the yuan traded at 

an average of 6.95 yuan to 1 dollar.42 The yuan’s appreciation with respect to the dollar during the period covered 

in this report contributed 19 percent to growth in Chinese manufacturing labor costs in U.S. dollar terms. 

China in the global economy

Even as China ascends as a major economic player in the 

global economy, its position in the international landscape 

 Chart 3. Index of hourly compensation costs in manufacturing, selected countries and areas, 2008

NOTE: Data are not strictly comparable. Direct comparisons should 

be made with caution.

SOURCES: Data for China are from table 4 of this article. Data for 

other countries and areas are from International comparisons of hourly 

compensation costs in manufacturing, 2008, USDL 10–1173 (Bureau of 

Labor Statistics), Aug. 26, 2010.

United States China Philippines Mexico East Asia

excluding Japan

Japan Euro area

140

120

100

80

60

40

20

0

140

120

100

80

60

40

20

0

Index (U.S. = 100) Index (U.S. = 100)

of labor costs has not changed dramatically. As measured 

in U.S. dollars, Chinese hourly labor compensation costs 

in manufacturing were roughly 4 percent of those in the 

United States and about 3 percent of those in the Euro 

Area in 2008 (chart 3). China’s costs were roughly on par 

with those of some developing countries like the Philippines, but lagged noticeably behind those of other countries like Mexico and Brazil. 

The Division of International Labor Comparisons at 

BLS recently released the results of a special study on labor costs in the formal manufacturing sector in India. The 

data from the study go through 2005 and are presented 

separately from the main BLS series because of comparability issues. Hourly compensation costs in Chinese 

manufacturing as a whole were slightly lower than those 

in India’s formal manufacturing sector in 2005. However, 

when hourly compensation costs in India’s formal manufacturing sector are compared with those in Chinese urban manufacturing units, a comparison of establishments 

that are more similar, Chinese compensation costs are 

slightly higher (chart 4).43 These differences are dwarfed, 

however, when labor costs in China or India are compared with those in developed countries. For example, as 

of 2005, total hourly compensation costs in Chinese man-
Manufacturing in China

50 Monthly Labor Review • March 2011

ufacturing (for TVEs and urban units) represented about 

2.5 percent of those in the United States, while the corresponding percentages for the Indian formal sector and 

Chinese urban units were only slightly higher, at about 

3.1 percent and 4.4 percent, respectively. 

Looking forward

Growth in China’s labor costs and employment in manufacturing from 2007 to 2008 suggests some resilience 

Chart 4. Average hourly compensation costs in manufacturing in China and India, U.S. dollars, 2002–05

Cost Cost

2002 2003 2004 2005

India

China total

China urban

$1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00

$1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00

NOTE: Data are not strictly comparable. Data for India include only 

the formal sector and exclude the informal sector. Direct comparisons should be made with caution.

SOURCES: Data for China are from table 4 of this article. Data for India are from Jessica Sincavage, Carl Haub, and O.P. Sharma, “Labor costs 

in India’s organized manufacturing sector” Monthly Labor Review, May 

2010, p. 10.

in the Chinese economy to withstand a major economic 

downturn. This growth is largely due to expanding domestic demand from a nation with rapidly rising per-capita income. Factors such as the gradual recovery in the 

global economy and renewed global demand for manufactured goods, as well as the growing shortage of labor 

in China, will likely put upward pressure on wages and 

compensation in China’s manufacturing sector in the future. These changes could fundamentally shape the global 

market for manufactured goods for decades to come.

Notes

ACKNOWLEDGMENTS: The authors would like to thank Constance 

Sorrentino and Jessica Sincavage for their comments on previous 

drafts of this article, Xing Shuqin and Song Jintao for their assistance 

in locating and procuring statistical volumes necessary for this analysis, and Ian Glennon and Jacob Kirchmer for verifying the accuracy 

of the data.

1 “TopTrading Partners - Surplus, Deficit, Total Trade,” U.S. Census Bureau, Foreign Trade Division, on the Internet at www.census.

gov/foreign-trade/top/ (visited Feb. 7, 2011). 

2 Tomoko A. Hosaka, “China surpasses Japan as world’s No. 2 

economy,” Washington Post, Aug. 16, 2010, on the Internet at www.

washing tonpost.com/wp-dyn/content/article/2010/08/15/

AR2010081503697.html?hpid=topnews (visited Feb. 7, 2011).

3 For the original report on 2002 employment and labor 

compensation in manufacturing, see Judith Banister, “Manufacturing 

Employment and Compensation in China,” on the Internet at 

www.bls.gov/fls/chinareport.pdf (visited Feb. 7, 2011). See also 

two Monthly Labor Review articles based on this report: Judith 

Banister, “Manufacturing employment in China,” Monthly Labor 

Review, July 2005, pp. 11–29, on the Internet at www.bls.gov/opub/

mlr/2005/07/art2full.pdf (visited Feb. 7, 2011); and Judith Banister, 

“Manufacturing earnings and compensation in China,” Monthly 

Labor Review, August 2005, pp. 22–40 on the Internet at www.bls.

gov/opub/mlr/2005/08/art3full.pdf (visited Feb. 7, 2011). 
Monthly Labor Review • March 2011 51

informally reported that weekly-hours-worked data are collected in 

China’s annual rural labor force survey, but these results have never 

been released.

19 For more information about these sources, see Banister, “Manufacturing earnings and compensation in China.”

20 For details on the compensation of self-employed versus enterprise 

manufacturing workers, see Judith Banister, “Manufacturing in 

China today: Employment and labor compensation,” The Conference 

Board Economics Program Working Paper Series, report number 

E-0021-07-WP, November 2007, pp. 23–26, and see especially 

table 7 on p. 26; on the Internet at www.conference-board.org/

publications/publicationdetail.cfm?publicationid=1377 (visited 

Feb. 15, 2011).

21 The U.S. figure represents nominal growth in dollars, and the 

Chinese figure represents nominal growth in yuan. The Chinese 

figure was calculated with data from table 4 of this article, and the 

U.S. figure was calculated with data from “Table 1.2: All Employees: Hourly compensation costs in U.S. dollars in manufacturing, 33 

countries or areas and selected economic groups, 1996-2008” (Bureau 

of Labor Statistics, August 2010), on the Internet at ftp://ftp.bls.

gov/pub/suppl/ichcc.ichccaesuppt1_2.txt (visited Mar. 4, 2011).

22 Price inflation for urban households was 1.5–1.6 percent annually in 2005 and 2006, but escalated to 4.5 percent in 2007 and 5.6 

percent in 2008. Consumer prices for rural households rose by 2.2 

percent in 2005, 1.5 percent in 2006, 5.4 percent in 2007, and 6.5 

percent in 2008. See China Statistical Yearbook 2009, Table 8-1, p. 

281.

23 Hongbin Li, Pak Wai Liu, Ning Ma, and Junsesn Zhang, Does 

Education Pay in Urban China? Estimating Returns to Education Using 

Twins (Sept. 23, 2005), on the Internet at http://iis-db.stanford.

edu/docs/270/hongbin-Does-Education-Pay-in-Urban-China.

pdf (visited Feb. 16, 2011).

24 Carsten A. Holz, Measuring Chinese Productivity Growth, 1952–

2005 (Hong Kong, July 2006), Tables 22–23 and Figures 33–34, on 

the Internet at http://hussonet.free.fr/chprodu.pdf; “Labor supply to become a constraint on economic growth in China—Policies 

focus to shift from job creation to increasing productivity,” (Japan, 

Research Institute of Economy, Trade, and Industry, 2009); Xin 

Yong-rong, Chen Qil, and Xiao Jun-Zhe, “The Decomposition of 

Labor Productivity Factors of Chinese Manufacturing Industry: A 

Dynamic Study Based on DEA method” (China, 2008); and Vincent Fernando, “Why China’s Labor Cost Advantage Is About to 

Disappear,” Business Insider, June 8, 2010, on the Internet at www.

businessinsider.com/china-labor-cost-inflation-2010-6 (visited 

Feb. 16, 2011).

25 Jian Qiao, “Labor Contract Law in China: Changes and Implications.” Paper presented at the conference Breaking Down Chinese 

Walls: The Changing Faces of Labor and Employment in China, 

Cornell University, September 2008.

26 Shinning Zhao and Jie Zhang, “Impact of employment contracts 

law on employment relations in China,” April 2010, on the Internet 

at www.thefreelibrary.com/Impact+of+employment+contracts+l

aw+on+employment+relations+in+China.-a0228172472; “China’s 

labour market,” The Economist, July 29, 2010; and Tini Tran, “China’s 

workers force unions to speak up,” The Globe and Mail, Toronto, Aug. 

5, 2010, p. B7.

27 Examples of such specifications for workers at particular 

factories might include good health, good eyesight, a strong body, 

the age of young adult, an unmarried status with no children or other 

dependents, a compliant and flexible personality, and the willingness 

to work very long hours, live in a group dormitory, and migrate far 

4 The baseline research for the year 2002 was updated through 

2004 in Erin Lett and Judith Banister, “Labor costs of manufacturing employees in China: an update to 2003–04,” Monthly Labor Review, November 2006, pp. 40–45, on the Internet at www.bls.gov/

opub/mlr/2006/11/art4full.pdf (visited Feb. 7, 2011). Manufacturing employment and compensation estimates were extended from 

2002 through 2006 in Erin Lett and Judith Banister, “China’s manufacturing employment and compensation costs: 2002–06,” Monthly 

Labor Review, April 2009, pp. 30–38, on the Internet at www.bls.

gov/opub/mlr/2009/04/art3full.pdf (visited Feb. 7, 2011).

5 International Comparisons of Hourly Compensation Costs in Manufacturing, 2008, USDL 10-1173 (Bureau of Labor Statistics), Aug. 26, 

2010, on the Internet at www.bls.gov/news.release/pdf/ichcc.pdf

(visited Feb. 14, 2011). 

6 For a discussion of TVEs, see Banister, “Manufacturing Employment and Compensation in China.”

7 See years 2003–09 of the China Town and Village Enterprise Yearbook (in Chinese) (Beijing, China Ministry of Agriculture).

8 For example, analysis of results from China’s first economic census, with data from 2004, supported the validity of the independently 

derived BLS estimates of China’s 2004 employment and labor compensation in manufacturing. See Lett and Banister, “China’s manufacturing employment and compensation costs: 2002–06,” p. 37.

9 Banister, “Manufacturing employment in China.”

10 China Labor Statistical Yearbook 2008 (Beijing, China National 

Bureau of Statistics and China Ministry of Human Resources and 

Social Security), Table 7-1, p. 465.

11 Banister, “Manufacturing employment in China.”

12 Michael Schuman, “How Will China Weather the Financial 

Storm?” Time, Oct. 23, 2008, on the Internet at www.time.com/

time/business/article/0,8599,1853112,00.html (visited Feb. 28, 

2011). 

13 China Statistical Yearbook 2008, Table 16-9; and China Statistical 

Yearbook 2009 (Beijing, China National Bureau of Statistics), Tables 

8-1, 8-3, 8-4, 8-12, 16-9, and 16-13. 

14 For the original hourly compensation costs estimates and a detailed explanation of the methods used, see Banister, “Manufacturing 

earnings and compensation in China.” For the hourly compensation 

cost data updated to 2003–04, see Lett and Banister, “Labor costs of 

manufacturing employees in China: an update to 2003–04.” Compensation estimates were updated through 2006 in Lett and Banister, “China’s manufacturing employment and compensation costs: 

2002–06.” 

15 Banister, “Manufacturing earnings and compensation in China.” 

16 Ibid., pp. 30–31. 

17 The workers employed by urban manufacturing corporations 

continue to put in a heavy workweek. As of late 2008, 5 percent of 

China’s urban manufacturing employees worked 20–39 hours in a 

week, 33 percent worked 40 hours weekly, 25 percent were on the 

job 41–48 hours, and 36 percent worked 48 hours or more per week. 

See the China Labor Statistical Yearbook 2009, Tables 1-70 and 1-77 

(Beijing, China National Bureau of Statistics and China Ministry of 

Human Resources and Social Security), pp. 112, 120, and 121.

18 When China’s statistical organizations dropped self-employed 

manufacturing workers from the TVE employment data, effective 

for 2007 and subsequent years, it is possible that this adjustment 

changed the actual average weekly hours worked by TVE manufacturing workers in China. However, the authors have no way of 

determining the impact of the absence of such published data. It is 
Manufacturing in China

52 Monthly Labor Review • March 2011

from home for a job. See “How Rising Wages Are Changing The 

Game In China,” Bloomberg Businessweek, Mar. 27, 2006, on the 

Internet at www.businessweek.com/magazine/content/06_13/

b3977049.htm (visited Feb. 17, 2011); David Barboza, “Labor 

Shortage in China May Lead to Trade Shift,” New York Times, 

Apr. 3, 2006, on the Internet at www.nytimes.com/2006/04/03/

business/03labor.html (visited Feb. 17, 2011); Jim Jubak, “A 15% 

raise? Try China or India,” MSN Money, Jan. 5, 2007, on the 

Internet at http://articles.moneycentral.msn.com/Investing/

JubaksJournal/A15RaiseTryChinaOrIndia.aspx (visited Feb. 17, 

2011); and Andrew Jacobs, “Chinese Factories Now Compete to 

Woo Laborers,” New York Times, July 10, 2010, on the Internet at 

www.nytimes.com/2010/07/13/world/asia/13factory.html (visited 

Feb. 17, 2011). 

28 See, for example, “How Rising Wages Are Changing The Game 

in China”; Barboza, “Labor Shortage in China May Lead to Trade 

Shift”; and Alan Wheatley, “Wage pressures hit Chinese city,” The 

China Post, June 14, 2007, on the Internet at www.chinapost.com.

tw/editorial/112324.htm (visited Feb. 28, 2011). 

29 See the International Labour Organization database on total 

and economically active populations by country, on the Internet at 

http://laborsta.ilo.org (visited Feb. 17, 2011).

30 China Population & Employment Statistics Yearbook 2009 (Beijing, 

China National Bureau of Statistics), Table 1-3. 

31 China Statistical Yearbook 2009, Table 1-2.

32 China Population & Employment Statistics Yearbook 2009, Tables 

1-3, 1-10, and 3-5. 

33 Jane Macartney, “China’s migrant workers hit by economic 

pinch as 20 million lose jobs,” The Times, Feb. 3, 2009, on the Internet 

at http://business.timesonline.co.uk/tol/business/economics/

article5638893.ece (visited Feb. 17, 2011). 

34 “China’s economic stimulus creates 22m jobs,” China Daily,

Sept. 16, 2010, on the Internet at www.chinadaily.com.cn/

bizchina/2010-09/16/content_11313345.htm (visited Feb. 17, 2011). 

35 Barboza, “Labor Shortage in China May Lead to Trade Shift.” 

36 For discussion of compensation costs in urban units and TVEs, 

see Lett and Banister, “China’s manufacturing employment and 

compensation costs: 2002–06,” table 3, chart 3, and p. 36.

37 John Knight, Deng Quheng, and Li Shi, The Puzzle of Migrant 

Labour Shortage and Rural Labour Surplus in China (Oxford, England, 

Oxford University Discussion Paper Series, number 494, July 2010), 

on the Internet at www.economics.ox.ac.uk/Research/wp/pdf/

paper494.pdf (visited Feb. 17, 2011). 

38 The exception is the cohort born in the late 1980s during a temporary easing of the implementation of family-planning regulations. 

Children born at that time are now in their early 20s.

39 Jubak, “A 15% raise? Try China or India”; Jacobs, “Chinese Factories Now Compete to Woo Laborers.”

40 Christopher A. McNally, “Defusing Tensions over China’s Exchange Rate Policy,” Asia Pacific Bulletin, Feb. 18, 2010, on the Internet at www.eastwestcenter.org/fileadmin/stored/pdfs/apb048_3.

pdf (visited Feb. 18, 2011).

41 People’s Bank of China, “Public Announcement of the People’s 

Bank of China on Reforming the RMB Exchange Rate Regime,” 

July 21, 2005, on the Internet at www.pbc.gov.cn/publish/

english/955/2001/20014/20014_.html (visited Feb. 28, 2011).

42 “Foreign Exchange Rates (Annual),” Board of Governors of 

the Federal Reserve System, Jan. 3, 2011, on the Internet at www.

federalreserve.gov/releases/g5a (visited Feb. 18, 2011).

43 Note that Indian and Chinese data are not strictly comparable 

because each country has its particular data limitations. The Indian 

data are from Jessica R. Sincavage, Carl Haub, and O.P. Sharma, 

“Labor costs in India’s organized manufacturing sector,” Monthly Labor Review, May 2010, pp. 3–22, on the Internet at www.bls.gov/

opub/mlr/2010/05/art1full.pdf (visited Feb. 18, 2011).