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administrative figures with other sources of data on manufacturing employee numbers and the urban-rural distribution of manufacturing workers, including the 1995 industrial census of China and especially the population census of November 1, 2000. The 2000 census gives the occupational breakdown of PRC manufacturing workers and the distribution of manufacturing workers by number of days worked in the week before the census, which are reported and discussed here.

The author also assesses the probable biases in China’s statistics on numbers of manufacturing workers and their wages. The report argues that city manufacturing enterprises in particular have powerful incentives to underreport the number of their manufacturing employees and especially the compensation of any employees whose work is reported. The main purposes of the underreporting of employee numbers, wages, and total labor compensation are avoidance of taxes and minimization of required employer payments to social insurance and employee housing funds administered by urban authorities.

This report demonstrates that manufacturing employment in China increased during the 1980s and early 1990s, peaked in about 1995-1996, declined during the late 1990s until 2000-2001, and increased again in 2002. The genuine declines in China’s manufacturing employment in the late 1990s were caused by restructuring and privatization of state-owned and urban collective-owned factories in the cities, which brought about massive layoffs of urban manufacturing workers and sharp increases in manufacturing labor productivity. Private sector manufacturing has thrived in both urban and rural areas in the late 1990s and the early 21st century. These factories are more productive than state-owned and collective-owned factories and are competitive in the domestic and global economies. The renewed increase in China’s manufacturing employment that began in 2002 or before is fueled by private corporations and businesses, both foreign-funded and domestically-owned.

As demonstrated in this report, the numbers published in the global and U.S. popular media on the low compensation of China’s manufacturing workers are in the ballpark of reasonable estimates. The author discusses factors that make China especially competitive in manufacturing for the global market, and some factors that are reducing and hampering China’s competitiveness. China is indeed an extremely low-wage manufacturing environment, and China also benefits from other advantages that give this country a competitive edge over many other possible manufacturing locations around the world, including low land prices, big concentrations of low-cost parts suppliers, a relatively stable and safe political situation, tax and regulatory policies that promote foreign direct investment in manufacturing, and China’s own huge potential and actual domestic market for manufactured goods.


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