Higher value labor dividend

There is an increasingly prevalent viewpoint that China's labor dividend that has bolstered its economic takeoff over the past decades will come to an end as the country's labor costs rise. This is an obsolete concept given that it equates labor with cheap labor instead of creative labor.

The rise in labor costs does not mean a decline in productivity. Developed countries have higher labor costs than China, but that does not mean their enterprises are weaker. Similarly, Vietnamese companies enjoy lower domestic labor costs than China's, but China's enterprises still enjoy a competitive edge over them.

The key to China's productivity lies in whether its enterprises can develop their core technologies and core competitiveness. Excessive preoccupation with profits from low-end manufacturing will not make them more competitive. Whether China can continue to benefit from its labor dividend amid the fierce international competition will be decided by whether its manufacturing sector can successfully make the transition from the low end to high end, from low efficiency to higher efficiency and from processing-based manufacturing to technology-based innovation.