Rising Chinese wages put pressure on production

China remains under pressure from the US and the European Union to reduce its overall surplus with them by allowing the yuan to appreciate. Wages in China are rising, driving up production costs that are already under duress thanks to rising inflation.

According to China's National Bureau of Statistics, the average earnings of urban workers rose 18% in the first half this year compared with 12 months earlier, rising to 12,964 yuan (US$1,878). Employee pay in the private sector leapt 19.2% to 12,610 yuan, besting the 17% gain to 13,800 yuan in salaries at state-owned enterprises. The average urban worker's salary was 24,932 yuan for all of last year. The consumer price index, a major gauge of inflation, rose 7.9% in the first half.

The country has moved closer to running a trade surplus with its neighbouring Southeast Asia countries in the first five months of this year. China usually runs a trade deficit, however the gap has declined more than 28% compared with the same period in 2007.

The country's trade deficit with the ten members of the Association of Southeast Asia Nations (ASEAN) declined US$1.96 billion, or 28.2%, to $4.99 billion in the five months to May compared with a year earlier, China's General Administration of Customs said in July. China's imports from the group rose 22.3% to $50.27 billion, while exports rose 32.6% to $45.28 billion as total trade gained 26.9% to $95.55 billion.