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Minimum Wage Increase Jacks Up Beijing Prices

The Beijing city government recently announced mandatory minimum wage increases of up to 20 percent in an attempt to reflect rapidly rising costs of living. Although still far short of what many in Beijing would consider a liveable income, the minimum monthly wage will increase from ¥800 to ¥960. Add to that an expected increase in the exchange rate later this year, and the cost of living for expats in Beijing is almost certain to rise. “Expect to see higher prices this year ... in anything service-oriented,” says James Roy, an analyst with China Market Research who is following the recent wage hikes. High-end supermarkets, spas and other leisure businesses will also likely see price increases. Beijing’s wage increase comes as a wave of wage hikes sweeps China, a result of government mandates, labor shortages and labor strikes. Businesses from Zhejiang to Shandong are complaining they just don’t have enough workers. Over 20 provinces and cities are planning to increase minimum wages this year, according to the China Daily. The list of pay raises is extensive—from a 33 percent increase in nearby Hebei province to 17 percent in Shanghai. Service may also suffer, as businesses may respond to the wage increase by keeping staff numbers low, says Roy. Of course, the mandatory wage increase doesn’t apply to mom-and-pop stores, so expats looking to pinch pennies may want to stick to self-run shops. But across-the-board price hikes may be inevitable, as the wage increases extend to the base of the supply chain, be it the factory worker bottling your Yanjing beer or the delivery person shuttling it to the store. Read more about China's rising consumer prices here.

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