China labour supply drying up

BEIJING (Reuters) - China's deep pool of labour, a key driver of its headlong economic growth, is drying up, a labour expert said on Wednesday.

The sea-change means companies will have to pay more to attract employees in coming decades, said Cai Fang from the Chinese Academy of Social Sciences (CASS), the country's top think-tank.

Cai, director of CASS's Institute of Population and Labour Economics, said China's rural labour surplus, the source of migrant workers for China's manufacturing industry over the past three decades, had shrunk to about 50 million from a peak of 200 million in the 1990s.

"The days of massive labour oversupply are over," Cai said at an economic forum.

The decline in the number of rural workers ready and willing to leave the land was pushing up migrant workers' wages at an increasingly rapid rate, Cai said.

"According to my research and relevant surveys, the wages of China's migrant workers rose 2.8 percent in 2004, 6.5 percent in 2005, 11.5 percent in 2006 and 20 percent in 2007," said Cai.

He said the shortage of labour was not cyclical but a long-term phenomenon caused by a shift in population structure.

Partly owing to the one-child policy that has been in place for nearly 30 years, China's labour force would grow more slowly in future than that of most other countries, Cai said.

In cities, Cai said the real unemployment rate, based on surveys in line with International Labour Organisation standards, was about 5 percent, down from a peak of 7.6 percent in 2000.