China’s labour market is under pressure, says Credit Suisse17 August, 2012, 14:32. Posted by Zarathustra
Yesterday’s China foreign direct investment was disappointing, showing that foreign companies are losing interests in direct investment into China. To us, slowing direct investment inflow and increasing outflow will make the task of easing liquidity more difficult, and action such as cutting RRR by the PBOC will not be real easing.
Dong Tao of Credit Suisse is among the only few sell-side China economists we pay attention to. He wrote today that sliding FDI into China suggests that further troubles are awaiting. Foreign companies are turning more negative on China, and it is starting to reflect in the sluggish inbound investment.
He also gave us a rather grim outlook regarding employment in China. Consistent with what the employment components of PMI and other anecdotal evidence we have been reading of late, Dong Tao suggests that the labour market is under pressure, particularly in the low end of the market as the manufacturing and export sector suffers from slowing economy, globally and locally:
Two years ago, migrant workers were seeking 20%-plus salary increases per year. The salary increases were down to mid-single digits at the beginning of this year. Lately, the labour market has turned into a buyers’ market again. One factory at Dongguan last week posted a hiring advertisement for 1,000 workers, but more than 4,000 job seekers showed up, a scene not seen since 2009. This clearly should have implications for domestic consumption, in our view.
The only upside of this is that as unemployment affects social stability, Dong Tao believes that the government will need to be more proactive about growth. But again, he reiterates that “China’s prime time as the world factory is behind us”.