30  Monthly Labor Review • April 2009

Manufacturing in China

Erin Lett

and

Judith Banister

Erin Lett is an econo- mist formerly in the Di- vision of International

Labor Comparisons,

U.S. Bureau of Labor

Statistics; Judith Ban- ister is the director of

global demographics

of The Conference

Board and the former

head of the Interna- tional Programs Center

at the U.S Census

Bureau. E-mail: judith.

banister@conferenceboard.org.

I

n 2006, China passed Mexico to become 

the United States’ second-largest trading 

partner in manufactured goods, behind 

only Canada.1 Because of China’s growing importance to the U.S. economy, there 

has been great interest in statistics about 

China’s manufacturing sector, particularly 

employment statistics and a comparable 

compensation costs measure. In response 

to this interest, the Bureau of Labor Statistics (BLS) sponsored a baseline research 

project to assess the quality of China’s data 

on manufacturing employment and labor 

compensation and to develop estimates of 

hourly compensation costs in China. The 

data sources and estimation procedures used 

in that original work have been the basis for 

updates through 2004 and, in this article, 

through 2006, when the average hourly 

compensation costs of China’s 112 million 

manufacturing employees were $0.81.2

The first section of this article reviews the 

available data sources for China’s manufacturing sector. The second section then 

presents the trend in that nation’s manufacturing employment from 1978 to 2006. 

Next, the article updates previous estimates 

of China’s manufacturing earnings and 

compensation costs, including the effect 

of the new floating exchange rate. A brief 

comparison of the results from China’s 

China’s manufacturing employment

and compensation costs: 2002–06

Both employment and compensation costs in China’s

manufacturing sector increased rapidly from 2002 to 2006; 

employment increased more than 10 percent during those 4 years,

to 112 million, while compensation costs increased

more than 40 percent, to $0.81 per hour worked

First National Economic Census with those 

from the annual data sources used herein 

concludes the article.

Manufacturing sector data sources

The concepts and coverage of China’s published statistics on manufacturing employment and wages often do not follow international standards and can be difficult to 

understand. Some of the difficulty is related 

to the fact that not all of the data are collected by one agency: data from urban areas are the responsibility of the Ministry of 

Labor and Social Security, whereas data for 

other areas—in the form of town and village enterprise (TVE) data3

—are compiled 

and reported by the Ministry of Agriculture. 

This system of data collection is based on an 

annual reporting system from work units 

that originally reflected a planned socialist 

or Marxist economy and emphasized urban 

data over rural data. Today, analysts have 

comparatively detailed yearly figures on employment and earnings in urban manufacturing units, and these figures are published 

in easily accessible statistical volumes.

In contrast, minimal labor-related statistics 

are published about China’s large network of 

factories and small manufacturing units besides urban units. The fact remains that the 
Monthly Labor Review • April 2009  

Chart 1. Yearend manufacturing employment in urban units and in town and village enterprises, China, 

 1990–2006 Millio

of persons

Milli

of persons

SOURCE: Table 1. Based on and updated from Judith Banister,“China trend report: How many manufacturing employees are

there in China?”The Conference Board, China Center for Economics and Business Monthly Member Briefing, October 2007, p. 4.

130

120

110

100

90

80

130

120

110

100

90

80

1990 1994 1998 2002

majority of China’s manufacturing workers are employed 

outside of urban enterprises, yet each year only two relevant numbers are published about them: the total number of manufacturing employees in China who work in 

establishments and groups besides urban manufacturing 

units and the total annual wage bill for those manufacturing workers.

Estimates of total employment and average hourly 

compensation costs for China’s manufacturing sector 

are constructed by combining the ample urban data with 

the less plentiful compiled and published figures on TVE 

manufacturing. Important gaps in the TVE data are filled 

by estimating nonwage components of labor compensation as well as 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, including China’s 

First National Economic Census (discussed later in the 

article), supports the general validity of the BLS annual 

calculations on China’s manufacturing employment and 

labor compensation.

Yearend manufacturing employment, 1978–2006

Total yearend manufacturing employment in China increased from 1978 to the mid-1990s, peaking at 126.08 

million workers in 1996. (See chart 1 and table 1.4) In 

the late 1990s, privatization in China’s manufacturing 

establishments and intense global competition brought 

increases in labor productivity, accompanied by a drop in 

manufacturing employment in urban China and a slight 

decline in TVE manufacturing employment as firms shed 

excess workers from the era of State-owned enterprises in 

order to become more cost efficient. In 2002, total yearend 

manufacturing employment bottomed out at 100.68 million workers. In recent years, with much of the redundant 

employment of the previous era eliminated and foreign 

demand for Chinese-manufactured goods growing by 25 

percent per year, total employment has shown an upward 

trend.5 By the end of 2006, China’s manufacturing employment had increased once again, to 112.63 million, 

nearly 8 times the level of manufacturing employment in 

the United States (14.16 million).
Manufacturing in China

32  Monthly Labor Review • April 20

Table 1. Yearend manufacturing employment in China, 1978–2006

 Reported manufacturing

Total manufacturing

Town and village enterprises Manufacturing employment, employment

employment 

(TVEs) urban units plus TVEs

Year

in urban units 

Total Rural Industry Manufacturing Total Total 

(yearend) (average)

 

1978......................... 53.32 17.34 (

1

) 17.34 (

1

) (

1

) (

1

)

1980......................... 58.99 19.42 (

1

) 19.42 (

1

) (

1

) (

1

)

1985......................... 74.12 27.41 (

1

) 41.37 (

1

) (

1

) (

1

)

1986......................... 80.19 31.39 (

1

) 47.62 (

1

) (

1

) (

1

)

1987......................... 83.59 32.97 (

1

) 52.67 (

1

) (

1

) (

1

)

1988......................... 86.52 34.13 (

1

) 57.03 (

1

) (

1

) (

1

)

1989......................... 85.47 32.56 (

1

) 56.24 (

1

) (

1

) (

1

)

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

1

)

1991......................... 88.39 32.68 55.01 58.14 53.73 108.75 106.92

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 64.34 119.26 120.82

1995......................... 98.03 39.71 54.93 75.65 69.92 124.85 122.06

1996......................... 97.63 40.19 53.44 78.60 72.64 126.08 125.47

1997......................... 96.12 40.32 51.30 61.49 56.83 108.13 117.11

1998......................... 83.19 39.29 38.26 73.34 67.78 106.04 107.09

1999......................... 81.09 39.53 35.54 73.95 68.35 103.89 104.96

2000......................... 80.43 41.09 33.01 74.67 69.01 102.02 102.95

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

2002......................... 83.07 45.06 29.81 76.68 70.87 100.68 100.88

2003......................... (

1

) (

1

) 29.81 (

1

) 72.73 102.54 101.61

2004......................... (

1

) (

1

) 30.51 (

1

) 75.68 106.19 104.36

2005......................... (

1

) (

1

) 32.11 (

1

) 78.48 110.59 108.39

2006......................... (

1

) (

1

) 33.52 (

1

) 79.11 112.63 111.61

1 Not available or not included in analysis.

NOTE: In 2002, manufacturing employment for TVEs was published for t

first time and was 92.4 percent of TVE “industry”[gongye] employment. The TVE

industry employmentseries goes back to 1978. The proportion of TVE industry

employment in prior years that consisted of manufacturing workers is unknown, but for the purposes of constructing a longer time series, TVE manufacturing employment during each of those years is assumed to be 92.4 percent

of TVE industry employment that year, on the basis of the published figure for

2002. Manufacturing employment in urban units has been published for the

years 1994–2006. Years prior to 1994 are estimated from the trend found in

manufacturing urban“staff and workers,”a subgroup that accountsfor 99 percent of urban manufacturing staff and workers between 1994 and 1997.

SOURCES: Data for 1978–2002 are takenfromJudithBanister,“Manufacturi

employment in China,”Monthly Labor Review,July 2005, p. 13; China National

Bureau of Statistics and China Ministry of Labor and Social Security, compilers, China Labor Statistical Yearbook 2007 (Beijing, China Statistics Press,

2007), p. 10; China Ministry of Agriculture, China TVE Yearbook Editorial Committee, editors, China Village and Town Enterprise Yearbook, 2004 [in Chinese]

(Beijing, China Agriculture Publishing House, 2004), p. 102; China Ministry

of Agriculture, China TVE Yearbook Editorial Committee, editors, China Village 

and Town Enterprise Yearbook, 2005 [in Chinese] (Beijing, China Agriculture

Publishing House, 2005), p. 108; China Ministry of Agriculture, China TVE Yearbook Editorial Committee, China Village and Town Enterprise Yearbook, 2006 

[in Chinese] (Beijing, China Agriculture PublishingHouse, 2006), p. 155; China

Ministry of Agriculture, compilers, China Agriculture Statistical Report, 2006 [in

Chinese] (Beijing, China Agriculture Press, 2007), p. 157.

[In millions]

These estimates are far higher than the “official” national 

totals for manufacturing employment published by China’s National Bureau of Statistics through 2002. (See table 

1.) The published yearend total of 83.07 million workers 

for 2002 included 29.81 million “manufacturing employees in urban units,” 45.06 million “rural” manufacturing 

employees of registered manufacturing enterprises outside of areas classified as urban, and another 8.21 million 

informal manufacturing workers outside of established 

enterprises.6

In this article, total manufacturing employment for China as a whole is calculated by combining manufacturing 

employment in TVEs (rather than “rural employment”) 

with “manufacturing employment in urban units.” China’s 

National Bureau of Statistics has never published corresponding wage data for “rural” manufacturing employees, 

whereas earnings data are published for TVE employees. 

Also, previous research has shown that about a third of 

manufacturing employment in nonurban enterprises is 

likely not covered in the official “rural” series.7 For these 
Monthly Labor Review • April 2009  

China Statistics Press, 2006), p. 185; and China Ministry of Agriculture, China

TVE Yearbook Editorial Committee, editors, China Village and Town Enterprise 

Yearbook 2006 [in Chinese] (Beijing, China Agriculture Publishing House,

2006), p. 156. Earnings data for 2006 are from China National Bureau of

Statistics and China Ministry of Labor and Social Security, compilers, China 

Labor Statistical Yearbook 2007 (Beijing, China Statistics Press, 2007), p. 203;

and China Ministry of Agriculture, compilers, China Agriculture Statistical Report 2006 [in Chinese] (Beijing, China Agriculture Press, 2007), p. 158.

Table 2. Estimated compensation costs of manufacturing employees in China, 2005 and 2006

Average Annual

number of earnings per Annual compensation Monthly compensation Hourly compensation

employees employee per employee per employee per employee

(millions)

 

(yuan) 

 

Yuan U.S. dollars Yuan U.S. dollars Yuan U.S. dollars

2005

Total, manufacturing urban units

  and town and village

enterprises (TVEs)......................    108.39 10,812 13,785 $1,682 1,149 $140 5.94 $0.73

Manufacturing urban units........     31.31 15,934 24,506 2,991 2,042 249 10.63 1.30

ManufacturingTVEs.......................     77.08 8,732 9,430 1,151 786 96 4.05 .49

 2006

Total, manufacturing urban units

  and TVEs........................................    111.61 12,039 15,456 1,939 1,288 162 6.43 .81

Manufacturing urban units........     32.81 18,225 28,030 3,516 2,336 293 11.74 1.47

Manufacturing TVEs.......................     78.80 9,463 10,220 1,282 852 107 4.24 .53

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 

the prevailing market exchange rate: 8.1936 yuan = 1 U.S. dollar in 2005 and

7.9723 yuan = 1 U.S. dollar in 2006 .

SOURCES: Employment data are from table 1. Earnings data for 2005 a

from China National Bureau of Statistics and China Ministry of Labor and

Social Security, compilers, China Labor Statistical Yearbook 2006 (Beijing,

Category of manufacturing

workers

reasons, TVE data from the Ministry of Agriculture are 

used instead to represent groups other than urban units. 

Compensation costs of manufacturing employees

The sections that follow update the hourly compensation 

costs series for China’s manufacturing employees developed in previous articles of the Review.

8

 The estimates 

are 2005–06 data based on the same statistical sources as 

the employment data constructed in the previous section. 

Therefore, they reflect compensation for China’s total 

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

in manufacturing TVEs. Like the employment data just 

described, earnings data from the Ministry of Labor and 

Social Security (urban data) and Ministry of Agriculture 

(TVE data) for various categories of workers are combined 

to construct an estimate of compensation costs in China’s 

manufacturing industry.9

As shown in table 2, the average number of manufacturing employees in China was 108.39 million during 2005 

and 111.61 million during 2006. Average yearly earnings 

(the basic wage in cash and in kind) totaled 10,812 yuan 

for 2005 and 12,039 yuan in 2006. Table 2 adjusts reported 

average annual earnings by including estimates for additional components of total labor compensation and translates annual, monthly, and hourly labor compensation into 

U.S. dollars at the market exchange rate each year.

Hours worked in manufacturing

Both the Ministry of Labor and Social Security and the 

Ministry of Agriculture publish an earnings figure that 

includes wages, bonuses, and allowances paid to employees in cash or in kind. These numbers are published on 

an annual basis only. To make meaningful comparisons 

with other economies, earnings must first be converted to 

an hourly basis. If hours worked by manufacturing employees in one country are substantially more or less than 

those worked by similar employees in other countries, 

then weekly, monthly, or annual earnings do not provide a 

good basis for comparing earnings for work done.

A description of the methodology used to calculate the 

original 2002 estimates of hours worked for China can be 

found in Banister’s August 2005 article. For the 2002 estimate of hourly compensation costs in China’s manufacturing sector, a figure for urban manufacturing employees’ 

annual hours worked was derived from the Ministry of 

Labor’s labor force survey. In 2002, the Ministry of Labor published two estimates of weekly hours worked for 

urban areas—one with reference to a week in spring and 

the other with reference 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 
Manufacturing in China

34  Monthly Labor Review • April 20

worked per year by urban manufacturing employees. For 

2003 and beyond, data on hours worked 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 estimate of annual hours worked to derive an estimate of annual hours 

worked from 2003 through 2006.

The published data on weekly hours worked in urban 

China showed a sharp increase from the 2003–04 period 

to 2005–06, not only in manufacturing, which exhibited a 

sudden 9-percent increase, but in most other economic sectors as well. Such a large jump in hours worked is unusual 

compared with the rest of the series for China, as well as 

from an international perspective. Discussions with China’s National Bureau of Statistics revealed that the 2005 

figures on hours worked in China’s urban economy did 

not come from the annual labor force survey, which is the 

source for all the other years. Rather, the 2005 data came 

from China’s 1-percent sample population survey, which 

occurs at the midpoints between the decennial censuses 

and is modeled on the questionnaires and definitions used 

in the decennial censuses of 1990 and 2000.

The decennial censuses and the related interim surveys 

use a broad definition of “urban” that includes all of China’s towns (zhen) which have been established as urban 

places. In contrast, China’s reported annual data on the 

urban economy and the annual labor force surveys use a 

narrow definition of “urban” that excludes most of China’s 

urban towns. It is not surprising that the broader definition results in a higher number of weekly hours worked, 

because manufacturing operations in China’s towns are 

likely less regulated than those in cities and, therefore, 

that employees in towns are required to work more hours 

per week, on average, than those in cities.

Given that the 1-percent sample survey covers a significantly larger “urban” population than the administrative 

data encompass, the 2005 data on hours worked are not 

comparable with the rest of the series and are not used 

in the compensation estimates calculated in this article. 

Instead, urban weekly hours worked for the 2005 autumn 

reference period are estimated, using the average of the 

2004 and 2006 autumn labor force survey data.

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 estimated TVE annual hours worked in 2002 for each 

of the subsequent years. From 2003, for the purposes of 

this article, data on hours worked for both urban and TVE 

employees have been estimated on the basis of changes in 

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

year from China’s labor force survey (after adjusting the 

published figure for 2005). These percent changes are then 

applied to the estimate of the previous year’s annual hours 

worked to derive an estimate of annual hours worked for 

the year in question.

Estimating nonwage compensation costs

In order to estimate total compensation costs for China’s 

manufacturing employees, additional 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. On the one hand, the relevant compensation data 

for calculating social benefits as a percentage of total earnings for urban establishments are from a survey of such 

establishments that China’s Ministry of Labor conducted 

with reference to 2002. On the other hand, social benefits 

as a percentage of total earnings for TVE employees were 

based on a survey of large manufacturing enterprises in 

Nanjing Municipality for the years 1994–2001, as well as 

on assumptions about the level of benefits in large and 

small establishments, and between enterprises located in 

suburban areas and in rural areas.10 The results of these 

surveys were used to construct the original 2002 estimates 

of China’s manufacturing compensation costs.

The Ministry of Labor has not published any data from 

a more recent survey. Without such data, the ratio of employer expenditures for social benefits to direct earnings 

is held constant for the 2003–06 estimates at the 2002 

levels.

Total hourly compensation costs in 2002–06

Although hourly compensation costs in China’s manufacturing sector increased relatively rapidly compared 

with those of other economies between 2002 and 2006,11 

average hourly compensation in China continues to be 

a small fraction of that found in the United States and 

other developed Western economies. (See table 3 and 

chart 2.) Average hourly compensation costs for China’s 

manufacturing sector in 2006 were $0.81, 2.7 percent of 

the average hourly compensation costs of manufacturing 

employees in the United States for the same year.12 Because hourly compensation costs in China have grown at 

an annual rate 3 times that of the United States during 
Monthly Labor Review • April 2009  

the 5 years covered in this series (9 percent and 3 percent, 

respectively), this percentage has edged higher, starting 

from 2.1 percent of U.S. compensation costs in 2002 and 

increasing slightly each year. Note that all comparisons of 

China’s data with data from the United States or other 

countries refer to the new BLS international comparisons series of hourly compensation costs for all employees 

in manufacturing; previous articles used the production 

workers series for comparisons. The all-employees series is 

used because it is more comparable with the worker covChart 2. Average hourly compensation costs of manufacturing employees, selected economies and regions, 

 2006

1 ‘‘East Asia excluding Japan”comprisesthe Republic of Korea, the

Philippines, Singapore, and Taiwan.

2 “Euro area”refersto European Union member countriesthat had

adopted the euro as the common currency as of January 1, 2009.

SOURCES: U.S. Bureau of Labor Statistics, “International compari- sons of hourly compensation costs in manufacturing, 2007” (Bu- reau of Labor Statistics, Mar. 26, 2009), on the Internet at www.bl

gov/news.release/pdf/ichcc.pdf.The data in this chartreferto the

all-employees series rather than the production worker series. For

China, data are from this article and are not from the BLS series.

Table 3. Estimated compensation costs of manufacturing employees (hourly compensation per employee) in China, 2002–06   

        

 Yuan 

 2002 2003 2004 2005 2006

       

Total, manufacturing urban units and town and

  village enterprises (TVEs)............................................    4.73 5.17 5.50 5.94 6.43

Manufacturing urban units...........................................    7.87 8.87 9.86 10.63 11.74

Manufacturing TVEs..........................................................    3.40 3.63 3.73 4.05 4.24

   

    U.S. dollars 

 2002 2003 2004 2005 2006

Total, manufacturing urban units and TVEs.............    $0.57 $0.62 $0.67 $0.73 $0.81

Manufacturing urban units...........................................    .95 1.07 1.19 1.30 1.47

Manufacturing TVEs..........................................................    .41 .44 .45 .49 .53

   

    SOURCES: Table 2; and Erin Lett and Judith Banister, “Labor costs of manufacturing employees in China: an update to 2003–04,” Monthly Labor Revie

November 2006, p. 43.

Category of manufacturing workers

140

120

100

80

60

40

20

0

140

120

100

80

60

40

20

0

United States China Mexico Japan Philippines    

Index

($29.98 = 100)

Index

($29.98 = 100)

East Asia

excluding Japan1
Manufacturing in China

36  Monthly Labor Review • April 20

erage of the Chinese data, which includes both manual 

and nonmanual workers.

Urban and TVE compensation costs

The difference between urban and TVE hourly compensation costs continues to be one of the central features 

of Chinese compensation. In 2002, the first year in the 

series, total hourly compensation costs for manufacturing employees in urban units was 2.3 times that of their 

TVE counterparts ($0.95 and $0.41, respectively; see table 

3). Between 2002 and 2006, compensation costs, in yuan, 

for employees in urban manufacturing units grew 12 percent annually, on average. In contrast, compensation costs 

for TVE manufacturing employees grew about half that 

amount each year, namely, 7 percent. As a result, compensation costs for urban manufacturing enterprise employees 

were about 2.8 times the level of all other manufacturing 

workers in 2006 ($1.47 and $0.53, respectively; see chart 

3). Because more than two-thirds of China’s manufacturing employees are categorized as TVE workers, total manufacturing compensation in China more closely reflects 

the compensation costs of TVE workers than it does urban 

unit compensation costs.

The exchange rate effect

Compared on a national currency basis, compensation 

costs across countries show underlying wage and benefit 

trends within each country. However, changes in currency 

exchange rates often have a large impact on compensation 

costs on a U.S. dollar basis. For 2002–04, the first 3 years 

of the series for hourly compensation costs for manufacturing employees, the Chinese yuan was pegged to the 

U.S. dollar at 8.28 yuan per U.S. dollar. Thus, all changes 

in compensation costs in U.S. dollars for these years of 

the series simply reflect changes in compensation costs 

measured in yuan.

In July 2005, the People’s Bank of China announced that 

the value of the yuan would be increased by about 2 percent, to 8.11 yuan per U.S. dollar.13 In addition, the yuan 

was allowed to float within a narrow 0.3-percent band 

against a basket of foreign currencies in daily trading. (The 

band was widened to 0.5 percent in May 2007.14 ) Within 

Chart 3. Average hourly compensation costs of manufacturing employees in China, town and village 

 enterprises (TVEs) and urban units, 2002–06

    2002 2003 2004 2005 20

 Manufacturing TVEs  Manufacturing urban units

2.00

1.00

0.00

2.00

1.00

0.00

U.S. dollars U.S. dollars
Monthly Labor Review • April 2009  

and Song Jintao for their assistance in locating and procuring statistical volumes 

necessary for the presentation of the analysis; and Serena Lin for verifying the 

accuracy of the data.

1

 “Top Trading Partners—Surplus, Deficit, Total Trade” (U.S. Census Bureau, 

this new exchange rate regime, the yuan has gradually appreciated against the U.S. dollar, rising from an annual 

average of 8.28 yuan per dollar in 2004 to 8.19 yuan per 

dollar in 2005 and then to 7.97 yuan per dollar in 2006.15

Because of these changes, 2005 and 2006 hourly compensation costs for China reported in U.S. dollars reflect 

not only the increase in national currency compensation 

costs, but also the appreciation of the yuan. This results in 

a larger annual increase in Chinese hourly compensation 

costs when measured in U.S. dollars than when measured 

in yuan (11 percent and 8 percent, respectively, between 

2005 and 2006).

China’s First National Economic Census

This section presents figures from China’s First National 

Economic Census, with data referring to 2004, to support the validity of the annual estimates of employment 

and hourly compensation costs that are based on China’s 

regular annual reports used in this and previous articles. 

Total 2004 employment in Chinese manufacturing, from 

the Economic Census, was calculated by summing average employment in manufacturing enterprises that were 

operational in 2004 (80.81 million) with self-employed 

and household employment (24.62 million), for a total of 

105.43 million employees in the manufacturing sector.16 

This figure is fairly consistent with that year’s average 

manufacturing employment figure obtained from annually reported data and used by BLS to estimate hourly compensation costs in China’s manufacturing sector (104.36 

million employees).17

Likewise, hourly compensation costs for 2004, as calculated with data from the Economic Census, are similar to those based on annual data.18 On the basis of the 

Economic Census, 2004 hourly compensation costs in 

China’s manufacturing sector were 5.96 yuan, or $0.72, 

which was 2.5 percent of U.S. hourly compensation costs 

in manufacturing.19 Data from China’s annual reporting 

systems resulted in an estimate for China’s 2004 hourly 

manufacturing compensation costs of 5.50 yuan, or 

$0.67, equivalent to 2.3 percent of the U.S. figure for that 

year. The small difference in these estimates came about 

because manufacturing enterprises in China reported 

slightly higher numbers for the average earnings or base 

wage of their employees in the Economic Census forms 

than in their regular annual reporting forms for the same 

year.

China’s National Bureau of Statistics plans to conduct a 

second Economic Census with data referencing the 2008 

calendar year. By the time data are published from this 

census, much more information about the coverage of 

those data and the coverage of the data from the annual 

sources may have been published as well. BLS would like 

to make fuller use of Economic Census data for refining 

its annual updates of China’s manufacturing employment 

and hourly compensation.

China’s manufacturing in the global economy

China has far more manufacturing employees than any 

other country. It supplies the world with labor-intensive manufactured products and is gradually engaging 

in more skill-intensive and capital-intensive production. 

Manufacturing compensation costs for employers are rising rapidly, especially when measured in U.S. dollars, but 

remain a small fraction of hourly compensation costs for 

manufacturing employees in developed and newly industrialized Asian economies. China continues to be highly 

competitive in global manufacturing of low- and middlerange industrial commodities, such as cheap consumer 

goods, standardized equipment and computer hardware, 

and household durable goods, but is still not so competitive in manufactures based on cutting-edge technology.

The global economic downturn that began in late 2008 

likely will affect the Chinese manufacturing sector by decreasing the market for China’s export products. In addition, compensation costs measured in U.S. dollars will 

be affected by the strengthening yuan, which continued 

to appreciate against the dollar during 2007 and 2008. 

How these two events and others will play out in relation to Chinese manufacturing employment and hourly 

compensation costs is not yet clear, but that the two sets 

of phenomena will be intertwined is certain.

Notes

ACKNOWLEDGMENTS: The authors would like to acknowledge the assistance of 

Bruce Levine, labor counselor in the U.S. Embassy in Beijing. Mr. Levine met 

with Chinese officials on behalf of the authors to obtain information on several 

statistical questions, including the problematic data on hours worked in urban 

manufacturing. The authors also would like to thank Constance Sorrentino and 

Chris Sparks for their comments on previous drafts of this article; Xing Shuqin 
Manufacturing in China

38  Monthly Labor Review • April 20

Foreign Trade Division, January 2009), on the Internet at www.census.gov/

foreign-trade/top (visited Mar. 17, 2009).

2

 The currency denoted by the dollar sign ($) is U.S. dollars. For the original 

detailed report on 2002 manufacturing employment and labor compensation, 

see Judith Banister, “Manufacturing Employment and Compensation in China,” 

on the Internet at www.bls.gov/ilc/chinareport.pdf (visited Mar. 17, 2009), or 

the following two Monthly Labor Review articles based on that 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 Mar. 17, 2009); 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 Mar. 17, 

2009). These works were 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 Mar. 17, 2009).

3

 For a discussion of TVEs, see Banister, “Manufacturing Employment and 

Compensation in China.”

4 The partial, incomplete data in table 1 under “Reported manufacturing employment” show the rising trend from 1978 to 1990. Subsequent manufacturing 

employment trends are derived from the nearly complete series for 1990–2006 

under “Manufacturing employment, Urban units plus TVEs.” 

5 World Trade Organization, “Trade Profiles: China,” on the Internet at stat.

wto.org/CountryProfile/WSDBCountryPFView.aspx?Language=E&Country

=CN (visited Mar. 17, 2009).

6

 Banister, “Manufacturing employment in China.”

7 Ibid.

8 For the original estimates of hourly compensation costs and a detailed 

explanation of the methods used, see Banister, “Manufacturing earnings and 

compensation in China.” For the data on hourly compensation costs, updated 

to 2003–04, see Lett and Banister, “Labor costs of manufacturing employees 

in China.” 

9

 See Banister, “Manufacturing earnings and compensation in China,” 

for a more detailed explanation of the limitations of published data from 

China.

10 See Banister, “Manufacturing earnings and compensation in China,” for 

more information about these sources.

11 “International comparisons of hourly compensation costs in manufacturing, 

2006” (Bureau of Labor Statistics, Jan. 25, 2008), on the Internet at www.bls.

gov/news.release/pdf/ichcc.pdf (visited Mar. 17, 2009).

12 All estimates of compensation costs and the associated percent changes in 

this article are calculated with the use of nominal currency—that is, current 

dollars or current yuan.

13 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/english//detail.asp?col=6400&ID=542 (visited 

Mar. 17, 2009).

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

China on Enlarging the Floating Band of the RMB Trading Prices against the 

U.S. Dollar in the Inter-bank Spot Foreign Exchange Market,” May 18, 2007, 

on the Internet at www.pbc.gov.cn/english//detail.asp?col=6400&ID=837

(visited Mar. 17, 2009).

15 Board of Governors of the Federal Reserve System, “Foreign Exchange 

Rates (Annual),” Jan. 2, 2008, on the Internet at www.federalreserve.gov/

releases/g5a (visited Mar. 17, 2009).

16 China’s National Bureau of Statistics published Economic Census selfemployed and household data only for “industry,” which includes mining and 

quarrying; manufacturing; and the production and distribution of electricity, 

gas, and water. A “manufacturing-only” employment estimate was obtained by 

multiplying the ratio of self-employed and household manufacturing employment to self-employed and household industry employment for 2003 from 

the Yearbook of Industry and Commerce by industry employment from the 

Economic Census.

17 Note that the status of the self-employed and family businesses in the annual data (that is, to what extent they are included) is unclear.

18 The analysis in this section of the article is from Judith Banister, “Manufacturing in China Today: Employment and Labor Compensation,” The Conference Board Economics Program Working Paper Series EPWP #07–01, 2007, on 

the Internet at www.conference-board.org/economics/workingpapers.cfm

(visited Mar. 17, 2009).

19 The estimate of U.S. hourly compensation costs, $28.98 in 2004, does not 

include the unincorporated self-employed or unpaid family workers. No data 

are available to determine what percentage of “self-employed and household 

employment” from China’s Economic Census these two groups constitute. To 

present some idea of the maximum size of the effect these two groups may have, 

the comparable figure for the 80.81 million enterprise employees in Chinese 

manufacturing was 6.87 yuan, or $0.83, about 2.9 percent of U.S. compensation 

costs in 2004.