Investors grapple with higher wages in 'low-cost' China

US lawnmower manufacturer Briggs & Stratton is used to worrying about turnover - just not the human kind. Like many foreign investors in China, the Milwaukee-based firm has been hit by a steady rise in wages - which puts it in the same boat as many US businesses in China responding to a survey released on Monday by the American Chamber of Commerce.
After decades of aggressive expansion in China, foreign employers like Briggs & Stratton face a relative shortage of experienced, English-speaking engineers and managers, and find it increasingly expensive to recruit and retain good staff. Rather than waiting around for extra digits on their paychecks, China's white collar workers are creating their own pay raises by jumping ship at the slightest temptation.
"Turnover is a huge issue for anyone in China. Our turnover is 9 to 10 percent," said Mark Plum, Asia president for Briggs & Stratton in Shanghai. He added that in Shanghai, turnover rates were generally around 18 to 20 percent. "Anywhere else you'd say that was terrible. Here, it's not half bad."
On the factory floor as well, cheap labour no longer looks limitless, prompting manufacturers to consider moving from the country's prosperous coast to poorer, cheaper inland regions. Some are even taking their lowest-margin, most labour-intensive operations to other countries altogether, such as Vietnam. Employees and wages now top the preoccupations of American investors in China, according to AmCham's annual business-climate survey of 390 companies. "I think it speaks to the economic transition that China is in now that it will not be able to rely on cheap labour to drive exports into the future," AmCham Chairman Ted Dean said.
"Management-level human resource constraints" ranked as the biggest business challenge in the survey, cited by 43 percent of respondents compared with 30 percent last year. "Non-management level" constraints were ranked third. Labour costs ranked as the third greatest challenge, after an economic slowdown in China and the wider global economy.