Since January 2024, the minimum wage in Czechia, Slovakia Poland has once again increased. In Central and Eastern Europe, the minimum wage is set at the central level and remains the same throughout the country. In China, it is regulated at the provincial level and varies depending on the region, and even the city. This year in Shanghai, the highest monthly minimum wage was increased to 2,690 RMB (approximately 347.10 EUR), while the highest hourly rate of 26.4 RMB (approximately 3.41 EUR) applies in Beijing. Therefore, despite the economic development of the People’s Republic of China, labor costs in China, from the perspective of the minimum wage, still remain low.
HOW IS THE MINIMUM WAGE DETERMINED IN CHINA?
The minimum wage rate in each province, autonomous region, and municipality directly under the central government in China is individually determined based on central regulations regarding the principles of its calculation. The administration at the provincial/region/municipal level takes into account factors such as local cost of living, social insurance contributions, average wages in the region, and the level of economic development. At the provincial level itself, the minimum wage may be set at a different level, even for individual cities, which happens quite often.
The minimum wage in China is a basic salary that does not include overtime pay, night shift allowances, high-temperature allowances, allowances for special working conditions, and other allowances provided for in Chinese labor law. In most regions, it includes social insurance contributions and housing fund contributions paid by employees, so to some extent, we could relate it to gross wages in Central and Eastern Europe. Only a few regions, such as Shanghai, explicitly state in their local regulations that their local minimum wage standards do not include social insurance contributions and housing fund contributions.
WHAT IS THE MINIMUM WAGE IN CHINA?
The lowest monthly minimum wage of 1,450 RMB (approximately 187 EUR) applies in Heilongjiang Province in Heihe, Yinchun and Daxinganling, and slightly higher at 1,540 RMB in several cities in the Jilin Province. Heilongjiang one of the country’s largest sources of crude oil, and it also is a major regional producer of natural gas. Interestingly, in the provincial capital of Harbin, the minimum wage is already 1,860 RMB, nearly 400 RMB more than in the periphery. Jilin Province is located in eastern China, bordering provinces such as Liaoning to the west, and North Korea to the south. The region’s economy is primarily based on agriculture. In some cities in this region, the minimum wage reaches 1,880 RMB.
As mentioned earlier, the highest minimum wage applies in Shanghai and Beijing. In Shanghai, it is 2,690 RMB per month and 24 RMB per hour, while in Beijing, the minimum hourly rate is 26.40 RMB, and the monthly rate is 2,420 RMB. This is not surprising, considering the average cost of living in these cities. A high minimum wage also applies in Shenzhen (2,360 RMB/month and 22.20 RMB/hour) and Guangzhou (2,300 RMB/month and 22.20 RMB/hour). All the above data is up to date as of January 2024; more can be found on the website https://wageindicator.org/. The above data indicates a persistent disparity in income levels in various regions of China, as well as a significant difference compared to the conditions known to us in Central and Eastern Europe – despite China’s rapid development in recent years. Although the authorities are trying to counteract this, disparities in income levels depending on the place of work are still visible.
WHAT INFLUENCES THE LEVEL OF THE MINIMUM WAGE IN CHINA?
As a rule, the minimum wage increase occurs as a result of decisions by the relevant authorities and does not take place at the same time throughout the territory of China. For example, in 2023, new minimum wage standards began to apply in provinces such as Hebei and Shanxi (January 1, 2023), Anhui (March 1, 2023), Shaanxi (May 1, 2023), Shanghai (July 1, 2023), and Beijing (September 1, 2023). Therefore, there is no predetermined rule as to when the minimum wage value will change; it depends on local conditions. Moreover, just like in Central and Eastern Europe, other indicators depend on the Chinese minimum wage.
One general rule is to set the minimum sick pay at 80% of the local minimum wage, although it may be higher. Similarly, the minimum severance pay for an employee must be calculated based on the local minimum wage value. Rents are also dependent on the same minimum value. Therefore, the minimum wage affects other costs that employers must consider when hiring employees.
When establishing a company in China and employing workers, the minimum wage is generally not offered to them, unless it is a job in a factory at an entry-level position. However, the minimum wage has a significant impact on other employer burdens, and its increase also contributes to an increase in wages across the economy. In recent years, there has been a noticeable trend of significant growth in labor-related lawsuits. Based on this, it can be inferred that Chinese workers are more willing and more frequently enforce their rights guaranteed by law. When planning investments in China, it is worth familiarizing oneself with the level of the minimum wage in individual regions. These indicators can help potential investors determine future labor costs depending on the region in which they will invest.
