Rising Wages in China, a Good Thing?

In one study, economist Patrick Artus said that the original idea of rising wages policy in China is “absolutely correct”. He said the share of consumption in China’s GDP is too low because the share of wages in GDP is too low, it is necessary to increase the share of wages.

However, the problem, he said, is that Chinese companies are responding to higher wages by increasing their prices because they do not want the profit share is declining. The effect of rising wage inflation is forcing the central bank to pursue a restrictive monetary policy: rising interest rates, where capital inflows that aggravate the problem of excess liquidity; especially increased rates of bank reserve requirements, thus braking the credit and consumption.

“The policy of wage growth fails so it leads to a brake, not an increase in consumption, especially when the rise in labor costs began to remove some industries from China, “said the economist.