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1、Asia Economics Analyst Issue No: 10/15 August 5, 2010 Goldman Sachs Global Economics, Commodities and Strategy Research at https:/ Important disclosures appear at the back of this document Michael Buchanan +852 2978 1802 Goohoon Kwon +822 3788 1775 Tushar Poddar +91 22 6616 9042 Enoch Fung +852
2、2978 0784 Helen (Hong) Qiao +852 2978 1630 Yu Song +852 2978 1260 Pranjul Bhandari +852 2978 2676 Shirla Sum +852 2978 6634 Fiona Lake (Global Markets) +852 2978 6088 Higher wages have not led to higher inflation and, so far, have not impaired Chinas international competitiveness We have found
3、no clear evidence that nominal wage increases have caused higher inflation in China in the past decade, or even in the past few months. Wage growth has largely been offset by labor productivity gains. Furthermore, Chinas labor costs in the manufacturing sector were actually lower in 2009 than in 200
4、1 on a per real unit output basis. We expect CPI inflation to trend lower as the policy-induced slowdown in domestic demand growth weakens further in the near term. We believe the inflation trend beyond the short term will be determined by monetary policy management. Our analysis also suggests that
5、the relative competitiveness of Chinas manufacturing sector vs. the US is at approximately the same level now as in 2002, lowering the need for further significant currency appreciation (as indicated by our GSDEER model). Chinas looming demographic constraints are likely to increase the upward press
6、ure on money wages, but we think this will at least partly be offset by the improvement in labor quality and the release of surplus labor from the agricultural sector. In our view, an increase in labor compensation as a share of total output would support domestic demand, and this is likely to be ac
7、hieved through a reduction (rather than an increase) in government restrictions on the labor market. China: CPI and export price inflation have been much lower than wage inflation -10 -5 0 5 10 15 20 25 20062007200820092010 % chg yoy Industrial Sector Wage, CPI, and Export Manufacturing Price Index
8、Export Manufacturing Price Index CPI Average industrial wage (official) Source: CEIC, GS Global ECS Research. China has ceased gaining competitiveness relative to the US since 2006 as the productivity differential narrowed and the nominal exchange rate appreciation continued 0 50 100 150 200 250 300
9、 20002002200420062008 China productivity China wage (effective in US$) US productivity US wage Base year = 100 Source: US Bureau of Statistics, CEIC, GS Global ECS Research. Goldman Sachs Global Economics, Commodities and Strategy Research Asia Economics Analyst Issue No: 10/15 2 August 5, 2010 Cont
10、ents Higher wages have not led to higher inflation and, so far, have not impaired Chinas international competitiveness We have found no clear evidence that nominal wage increases have caused higher inflation in China in the past decade, or even in the past few months. Wage growth has largely been of
11、fset by labor productivity gains. Furthermore, Chinas labor costs in the manufacturing sector were actually lower in 2009 than in 2001 on a per real unit output basis. Page 3 First published on August 5, 2010 Helen (Hong) Qiao, Yu Song Indonesia monetary policy meeting: On hold, as expected; inflati
12、on trends pose near-term policy challenges Bank Indonesia kept the benchmark Bank Indonesia rate unchanged at 6.50%, in line with the markets and our expectations. We are revising up our CPI inflation forecast to 6.2% for 2H2010, versus our previous forecast of 5.5%. Page 10 First published on Augus
13、t 4, 2010 Enoch Fung, Pranjul Bhandari Indias rising labour force India will likely provide the largest increase to the global labour force over the next decadewe estimate an additional 110 million by 2020. Demographics alone may contribute about 4 percentage points of annual GDP growth over the nex
14、t decade. Page 13 First published on July 28, 2010 Tushar Poddar, Pragyan Deb More concrete steps to expand CNY businesses in Hong Kong Two new supplementary agreements were signed between China and Hong Kong regarding the expansion of CNY businesses in Hong Kong on July 19. The new measures will al
15、low greater usage of CNY under the trade settlement scheme, and also provide a more flexible platform for Hong Kongs financial institutions to offer CNY-denominated investment products. Page 16 First published on July 22, 2010 Enoch Fung, Shirla Sum Korea: Exit policy: A gradual rate hike and KRW ap
16、preciation is ahead We reiterate our view that the recent rate hike signals the start of a slow and cautious withdrawal of monetary accommodation, not the beginning of aggressive tightening as reflected in the consensus. Page 19 First published on July 16, 2010 Goohoon Kwon, CFA FCI contribution cha
17、rts for Asia ex Japan Page 22 Regional Key Economic and Financial Indicators Page 24 Statistical Appendix Page 25 Goldman Sachs Global Economics, Commodities and Strategy Research Asia Economics Analyst Issue No: 10/15 3 August 5, 2010 Higher wages have not led to higher inflation and, so far, have
18、not impaired Chinas international competitiveness We have found no clear evidence that nominal wage increases have caused higher inflation in China in the past decade, or even in the past few months. Wage growth has largely been offset by labor productivity gains. Furthermore, Chinas labor costs in
19、the manufacturing sector were actually lower in 2009 than in 2001 on a per real unit output basis. We expect CPI inflation to trend lower as the policy-induced slowdown in domestic demand growth weakens further in the near term. We believe the inflation trend beyond the short term will be determined
20、 by monetary policy management. Our analysis also suggests that the relative competitiveness of Chinas manufacturing sector vs. the US is at approximately the same level now as in 2002, lowering the need for further significant currency appreciation (as indicated by our GSDEER model). Chinas looming
21、 demographic constraints are likely to increase the upward pressure on money wages, but we think this will at least partly be offset by the improvement in labor quality and the release of surplus labor from the agricultural sector. In our view, an increase in labor compensation as a share of total o
22、utput would support domestic demand, and this is likely to be achieved through a reduction (rather than an increase) in government restrictions on the labor market. Investors have become increasingly concerned about a potential wage-driven inflation surge in China, amid extensive media coverage of i
23、ncidents involving labor unrest and wage increases in the past few months. In a few cases, employers were reported to have agreed to raise manufacturing workers wages by more than 20% yoy, while several provinces have recently raised the minimum wage requirement by at least 15% yoy.1 This has led ma
24、ny to wonder whether Chinas ageing demographic will cause higher inflation structurally, and cause China to lose its international competitiveness in the long run. Although the recent labor unrest and wage increases are important, our analysis indicates that they have not been an important driver fo
25、r Chinese inflation in the past decade, mainly because wage growth has largely been offset by labor productivity gains. As a result, unit labor costs (ULC; labor cost per unit of output in consistent prices) have remained low, muting the upward pressure on CPI inflation and Chinas export prices. Mea
26、nwhile, solid growth in industrial sector profits confirms that wage growth has not surpassed output growth and the share of labor costs in total output continued to decline, even in the first five months of 2010. 1 In Hainan, the minimum Tier 1 wage was raised from Rmb630 to Rmb830 per month in Jul
27、y 2010 (up by 31.7%). Based on our analysis, Chinas international competitiveness improved relative to the US in the period from 2000 to 2005, as its productivity growth differential vs. the US outpaced the wage growth differential. However, this trend reversed as the productivity differential narro
28、wed and the nominal exchange rate adjustment continued in 2006-2008. This finding is largely in line with our GSDEER model, which implies that the CNY is not significantly undervalued. In the long term, we expect the rapid accumulation of human capital and further urbanization to cushion the upward
29、pressure on wages as a result of the fast pace of population ageing. That said, an increasing share of labor compensation in national income distribution would help rotate the growth driver away from investment and exports, and towards consumption. Meanwhile, we believe the government can help achie
30、ve this goal by allowing the market to play a more important role in determining wages. A relaxation of some of the governments restrictions on wages in the public sector could be even more useful for overall labor benefits and employment than reinforcing the collective bargaining system to increase
31、 private-sector wages. Goldman Sachs Global Economics, Commodities and Strategy Research Asia Economics Analyst Issue No: 10/15 4 August 5, 2010 1. Have wage increases caused higher inflation, or can we expect Made-in-China products to become more expensive? Wages in Chinas manufacturing sector have
32、 been rising at a rapid pace for some time Although an increase in compensation for Chinese workers over the past years was largely to be expected, the extent of the increase is surprisingworkers earnings have risen significantly as inexpensive Made-in-China products proliferated in the world market
33、 over the past decade. According to the official data series reported by the Ministry of Human Resources and Social Security and National Bureau of Statistics (NBS), the average wage for Chinese manufacturing-sector workers has grown at an average pace of 13.2% yoy from Rmb9,774 per year in 2001 to
34、Rmb26,599 per year in 2009.2 .including private-sector wages. Since the officially reported urban wage data series does not cover workers in the private sector (or the self-employed,) or those without urban household registrations,3 we believe it is subject to an upward bias in both wage levels and
35、growth rates.4 Information from the private-sector wage series newly released by the NBS and independent research5 suggests manufacturing wage growth in the private sector has been on average 34 percentage points (ppt) lower, but more flexible than in the public sector. Based on the official formal-
36、sector wage data and private sector wage information mentioned above, we compiled a synthetic wage series that covers the entire manufacturing sector, which still posts an annual average growth rate of 11.6% in 2001 2009 (see Exhibit 2). Nonetheless, CPI inflation and manufactured exported good pric
37、es have remained stable so far. While average nominal wage growth in the industrial sectors has remained above 10% per year since 2001, Chinas CPI inflation, in contrast, has been much more muted, thanks to the Peoples Bank of Chinas (PBOC) disciplined monetary policy management (see Exhibit 1). Mea
38、nwhile, evidence to support the case that wage increases were passed on to exported goods prices in the 2 We focus on manufacturing-sector wages and productivity gains because they produce tradable goods, providing an easier comparison of international competitiveness. 3 Workers with rural Hukou reg
39、istrations usually do not have long-term contracts with standard labor benefits, and so they are often excluded from the on-duty workers wage survey. 4 Note that in China manufacturing-sector wages (as well as earnings in general) have generally been higher in the public sector than in the private s
40、ector, which is not the case in many other economies. 5 A study based on regular surveys conducted by the All-China Federation of Industry and Commerce showed that private manufacturing-sector wages rose 9% per year in the period from 2000 to 2005: http:/ see also Incorporating the new EUR forecasts
41、 in Asia amidst the inevitable China slowdown, Asia Views, June 10, 2010). As the result, we lowered our 2010 GDP and CPI inflation forecasts for 2010 and 2011 (see China: Lowering our growth forecast for 2010, Asia Economics Analyst 10/13, July 2, 2010). Thus, the recent increase in nominal wages i
42、s a lagging indicator of previously strong aggregate demand and inflation, and hence, in our view, will not be a major contributor to future inflation. We believe the inflation trend beyond the short term will be determined by monetary policy management. We expect policymakers to end the current “wa
43、it and see” period and start to unwind policy tightening measures in 3Q2010 by easing controls on infrastructure investment and accelerating social housing, as well as by introducing less restrictive credit constraints. Once financial conditions loosen again, domestic demand will likely strengthen t
44、owards its long-term trend level in late 2010 and early 2011. If policymakers can manage to keep a more neutral monetary policy stance to stabilize growth and inflation in 2011, inflationary pressures would likely remain muted next year. Exhibit 6: Chinas manufacturing sector benefited from signific
45、ant gains in competitiveness relative to the US in 20002005 -10 0 10 20 30 40 00010203040506070809 % chg yoy China-US Wage Growth, CPI, and Labor Productivity Growth Differential Wage growth differential (local currency) Wage growth differential (USD) CPI inflation differential Labor productivity gr
46、owth differential Source: US Bureau of Statistics, CEIC, GS Global ECS Research. 4. Have wage increases made Chinas manufacturing sector less competitive internationally? China improved its international competitiveness relative to the US in 2000 2005 due to the large differential in productivity ch
47、anges. Chinas manufacturing sector benefited from significant gains in labor productivity relative to its US counterpart in 2000 2005 (see Exhibit 6). In other words, even though labor productivity is still much higher in the US manufacturing sector than in Chinas, the differences have narrowed beca
48、use productivity rose faster in China during this period. In addition, after accounting for the different pace of wage growth in the two countries, Chinas manufacturing sector has still gained competitiveness over the US in this period because the wage growth differential was more than offset by the differential in productivity growth. The recent shift in relative competitiveness rebalanced China