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China struggles to maintain growth pace for wages

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Workers at a Chinese factory

Workers at a Chinese factory

Wages in China kept pace with economic growth in the first half of 2016 but maintaining that will be difficult, the country’s statistics bureau said on Sunday.

It cited issues such as overcapacity in China’s coal and steel sectors as well as some declining agricultural prices as taking a toll on salaries.

Maintaining the relationship between the pace of growth and that of wage increases is a challenge requiring “close attention”, Wang Pingping, head of the National Bureau of Statistics’ (NBS) household survey office said, according to the bureau’s website.

Disposable household income, adjusted for inflation, rose 6.5 per cent in the first half of the year, compared with economic growth of 6.7 per cent, the statistics bureau reported on July 15.

Economic growth in the second quarter was faster than expected as a government spending spree and housing boom boosted industrial activity, but a slump in private investment growth points to a loss of momentum later this year.

Several Chinese provinces have slowed or halted increases to minimum wages, as companies face pressure from rising expenses and weakening demand. China’s human resources vice minister this month called for a slowdown in wage increases in order to maintain competitiveness.

China plans to allocate 100 billion yuan ($14.96 billion) to help local authorities and state-owned firms finance layoffs in the steel and coal sectors this year and in 2017. Layoffs from the two sectors are expected to total 1.8 million people, according to official estimates.

Meanewhile, China’s residential land prices rose faster in the second quarter than in the previous three months, while those for industrial land posted slower growth, a report from the Ministry of Land & Resources said.

Residential land prices in 105 cities surveyed gained 1.95 percent in April-June from the previous quarter, which saw a 1.27 percent increase from October-December, according to the ministry’s China Urban Land Price Dynamic Monitor.

The recovery in China’s property market since late last year has been a rare bright spot in the world’s second-largest economy, which has slowed amid weak demand at home and abroad, cooling investment and excess industrial capacity.

Data released on Friday, when China reported annual growth of 6.7 percent in the second quarter, showed the expansion of investment in real estate slowed in June. Property investment in January-June rose 6.1 percent from a year earlier, the National Bureau of Statistics (NBS) said, compared with 7 percent in January-May.

The land ministry report, dated Friday, showed that Shanghai led growth in residential land prices in the second quarter, with a 6.87 per cent gain from January-March, followed by Beijing, with a 4.48 per cent increase.

The Pearl River Delta area in southeastern China recorded faster growth in overall land prices than the Yangtze River Delta region in eastern China and the Bohai Bay area of north China.

“The domestic economy has held broadly steady, but the structural change is under way and downward pressure remains,” the report said. “The ample funding in the property sector is leading to the moderate increases in land prices.”

For the third quarter, a divergence in the property market between the biggest cities and smaller ones is expected to continue, while overall land prices should rise modestly, the ministry said.


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