Shenzhen, a major manufacturing hub in southern China, will increase its minimum wage by 13.6 percent in February despite warnings from factory owners the move could deal another blow to exporters already reeling from a sharp drop in Western orders.
Whilst China's leaders are aware of the pressures on exporters facing shrivelling orders from a debt-stricken eurozone, surging production costs and currency appreciation, they've also pledged to lift migrant factory worker wages to ease wealth inequalities and the sting of nagging inflation.
Shenzhen, a freewheeling boomtown bordering Hong Kong, will hike its minimum monthly wage to 1,500 yuan (153.43 pound) on February 1, the Shenzhen municipal human resources and social security bureau said in a statement on its website.
While it wasn't clear if other regions in the surrounding world factory of the Pearl River Delta would follow suit, the move comes as China's premier Wen Jiabao warned of growing slowdown concerns in the world's second largest economy.
The Federation of Hong Kong Industries, which represents around 3,000 industrialists running factories in China and has lobbied hard against the wage hike, said the timing couldn't have been worse.
It will prove to be a severe blow to industrialists, Stanley Lau, the deputy chairman of the federation, told Reuters.
The wage hike came after a string of major strikes at factories across China's coastal export zones in recent months, with angry workers often retaliating against attempts by factories to shave overtime pay and benefits amidst a fall in orders from anchor markets like Europe and the United States.
While according to Lau vice Guangdong governor Zhao Yufang said in December other cities in the Pearl River Delta would freeze minimum wages for the near to medium term, recent media reports have suggested broader provincial plans for wage hikes of around 13 percent this year, including in cities such as Zhuhai and Huizhou.
In the short term I hope the rest of Guangdong (province) will not also increase (the minimum wage), said Lau. This would increase the risks of factories being forced to close ... Even with orders, they may not make money.
Minimum monthly wages in Sichuan, a southwestern province and major food producer, will rise to between 800 yuan and 1,050 yuan in 2012, the Sichuan provincial government said last month.
Lau said he expected orders in the first quarter of 2012 to shrink by up to 30 percent, with western buyers expected to be very conservative in placing orders after average Christmas sales.
(Reporting By Sisi Tang and James Pomfret; Editing by Charlie Zhu and Jonathan Hopfner)