China guarantees minimum wages and holidays

Companies in China have to face higher labour costs in future due to a passed law. The new law provides holidays, minimum wages and should ensure better working conditions. The law will increase costs for all kind of companies especially in the textile and toy producing sector.
The new labour law is also applicable for companies with foreign shareholder and foreign multinational companies. The law also includes better dismissal protection for full-time employees, higher gratuities and guaranteed minimum wages. The State Council approved a regulation to a public holiday, which was published on Sunday on the website of the government. Accordingly, there will be eleven days of public paid holidays a year instead of the previous ten for all workers and employees who are in stable employment.

In addition to the eleven national holidays, China guarantees all employees a contractual right to annual holidays. In another new ten-point determination, the State Council decided that employees with less than 20 years of working have the right on 10 days of paid holidays and with more than 20 years 15 days per year. A company has to pay three times of a workers´ salary if the employee isn´t able to take his or her holidays due to business reasons. The State Council determined that these rules are applied also for private and family businesses.

That will mainly effects labour-intensive mass production companies of textiles, toys and for instance shoes. The biggest problems will face companies which export to the U.S. and Europe because of the converting rates which are included in these kinds of transactions. Summarizing, Chinese companies have to pay higher wages and social costs while these companies have higher energy and transportation costs. Therefore the margins get smaller comparing to previous years. The first mass production companies in China went bankrupt based on that fact because they are not longer competitive to multinationals or other companies in low-wages countries.

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2 thoughts on “China guarantees minimum wages and holidays

  1. i totally agree, because higher wages are also likely to raise prices of U.S. imports from China, and possibly reduce China’s attraction as the world’s manufacturing center.
    Originally, foreign manufacturers moved production facilities to China to take advantage of low labour costs compared to their own domestic work force. Now, faced with rising wages throughout China, foreign manufacturers are faced with two choices to keep costs down.

    The first is to move their manufacturing operations to other countries with low labor costs, and / or the second is to make capital investments in their Chinese operations and automate most of the facilities to increase productivities.

    Reply
  2. I also agree with this step, because of several reasons. First of all, the working conditions in China were not human…too low wages, long working hours, dangerous working conditions. These poor working conditions were often leading to conflicts and mass incidents between labor and management. The second important point is, that this new labour law about minimum wages, working holidays and improving working conditions in China will increase costs of products, what is, in fact, positive for other economies, since till now China was able to produce goods like clothes, toys, sport equipment and other products with very low costs, consequently was able to sell them for very low prices, what causes that other economics, especially in Europe or USA, cannot be competitive. The imports from China breaks home production in these countries, what causes decreasing GDP, employment and national economy at all.

    Reply

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