From 1 July 2025, Shanghai raised its monthly minimum wage from RMB 2,690 (£288) to RMB 2,740 (£294), a relatively conservative increase of less than 2%. The city’s hourly minimum wage also climbed from RMB 24 (£2.57) to RMB 25 (£2.68). While Shanghai retains the highest minimum wage in the country, the small increment marks its lowest annual increase in over a decade — signalling a broader strategic shift in China’s approach to wage setting.

The restrained increase comes at a time when many Chinese cities are weighing the need to support workers against mounting pressure on businesses. For low-income workers in the city, the additional RMB 50 (£5.36) a month may be welcome but is unlikely to keep pace with rising costs for essentials like rent, transport and food. Meanwhile, employers — particularly in the private sector and among SMEs — have been wary of sharper increases that could hit hiring and operating margins.

Shanghai’s move follows a pattern seen in other economically advanced parts of China, such as Beijing, Shenzhen and Guangdong, where minimum wage growth has slowed in recent years. Beijing now has the country’s highest hourly minimum wage at RMB 26.4 (£2.83), while Shenzhen and Guangdong follow closely behind Shanghai with monthly minimum wages of RMB 2,520 (£270) and RMB 2,500 (£267) respectively. Coastal cities continue to lead the pack, but the difference with other regions is narrowing as inland provinces roll out more substantial hikes.

China allows each of its 31 provincial-level regions to set their own wage levels, leading to wide disparities. While most now have minimum monthly wages above RMB 2,000 (£214), some less developed provinces such as Hunan and Liaoning still sit closer to RMB 1,700 (£182). Regional authorities are required by law to review wages at least every two to three years, but increases are not guaranteed. Shanghai skipped adjustments altogether in both 2022 and 2024, reflecting the uncertain post-Covid economic environment and the government’s cautious fiscal outlook.

The wider context for these adjustments is China’s drive towards “common prosperity”, a national policy ambition aimed at reducing inequality and spreading the benefits of growth more evenly. While minimum wage rises are just one part of this broader agenda, they remain a critical lever for supporting working-class incomes and boosting domestic consumption.

Still, policymakers are walking a tightrope. Labour-intensive industries such as manufacturing, retail and logistics remain sensitive to wage increases, particularly in regions where businesses already face thin margins. Some firms may respond by relocating operations to lower-cost inland areas, or by investing in automation. Others may reduce hiring or move workers to informal, lower-paid roles not protected by minimum wage regulations.

There is also a generational and demographic dimension. Migrant workers and young people are disproportionately represented in low-wage and part-time employment, and thus stand to benefit from wage increases, but they are also most at risk if businesses trim staff to offset higher costs.

Shanghai’s modest wage rise this year suggests a preference for gradualism. The increase was likely designed to signal continued government support for workers, without destabilising local businesses or contributing to inflation. Analysts expect other cities to follow similar trajectories: small, measured increases tied closely to local economic indicators such as productivity growth, employment rates and cost-of-living data.

With China’s economy facing slower growth, soft domestic demand and ongoing global trade pressures, wage-setting will remain a key balancing act for local and national authorities. The 2025 update may be modest on paper, but it offers insight into how China is managing its transition from high-growth industrial powerhouse to a more service-led, consumption-driven economy.

For now, Shanghai leads the country in both pay and prudence. The rest of China is watching closely.

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So, what is the minimum wage in China in 2023? Currently, Shanghai has the highest monthly minimum wage among China’s 31 provinces (RMB 2,690/£303 per month) and Beijing has the highest hourly minimum wage (RMB 26.4/£2.97 per hour). Sixteen regions – Beijing, Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Anhui, Fujian, Shandong, Henan, Hubei, Guangdong, Chongqing, Sichuan, and Shaanxi – have surpassed the RMB 2,000 (£225) mark in their monthly minimum wage standards. At the lowest end of the wage spectrum, Liaoning has the lowest monthly minimum wage level in China at RMB 1,420 (£160)

How does China determine minimum wages?

Minimum wage standards are determined by provincial governments, taking into consideration factors such as the minimum living costs of local employees and their dependents, the consumer price index of urban residents, social insurance premiums, and the local employment situation.

It should be noted that the minimum wage excludes things like overtime pay, allowances for night shifts or special working environments, and subsidies for meals, transportation and housing.

In most regions, China’s minimum wage standards do include the social insurance premiums and housing fund contributions paid by employees. In fact, it is possible for an employee’s take-home pay to be lower than the corresponding minimum wage standard. Only a few regions, such as Shanghai, clearly stipulate that their local minimum wage standards exclude social insurance premiums and housing fund contributions.

Local governments in China are generally required to update their minimum wages every few years but have the flexibility to adjust wages according to local conditions.

Most provinces set different classes of minimum wage levels for different areas depending on the given region’s level of development and cost of living. For example, a higher minimum wage class is established for the provincial capital and the most developed cities in the province, whereas smaller cities and rural areas fall under a lower wage class.

How do minimum wages impact labour costs in China?

As China’s economy moves up the value chain and makes the transition to innovation and services, most workers employed by foreign-invested enterprises already earn above the minimum wage. For example, workers in Shanghai made an average of RMB 10,338 (£1,164) per month through 2020 – nearly four times the local minimum wage.

Employer social insurance and housing fund obligations add around an additional 37% to employers’ labour costs on top of the employees’ gross salary.

For foreign investors, rising wages are an unavoidable feature of doing business in China. Yet when other factors like productivity, infrastructure, transportation costs and access to a massive domestic market are considered, China may still emerge as the more cost-efficient option compared to countries with lower statutory labour costs.

When comparing locations for foreign investment into China, minimum wages are a helpful barometer to gauge labour costs across different regions. From there, identifying industry-specific wage levels, availability of talent and access to regional incentives offer a more nuanced view of the labour costs within a given region.

For a full breakdown of minimum wages in China by province and city, see this article by China Briefing

A version of this article was first published by China Briefing, which is produced by Dezan Shira & Associates. 

The post What is the minimum wage in China in 2023? appeared first on Focus - China Britain Business Council.

Last year, seven regions (Chongqing, Shaanxi, Shanghai, Beijing, Hebei, Fujian, and Qinghai) in China announced an increase in their minimum wage. In 2018, 15 out of the 31 regions in mainland China increased their minimum wages, while 20 provinces did so in 2017.

Local governments in China are required to update their minimum wages at least every few years but have the flexibility to adjust wages according to local conditions. Most provinces set different classes of minimum wage levels for different areas depending on the given region’s level of development and cost of living. For example, a higher minimum wage class for the provincial capital and the most developed cities, and a lower class for smaller cities and rural areas.

A complete guide to China’s minimum wages can be found below.

China’s minimum wage: Understanding regional variation:

Hunan, Gansu, Guizhou, Tianjin, and Zhejiang are among the regions likely to adjust their minimum wages in mid to late 2020, given that they have not done so in the past two years.

Chinese regions often opt to increase minimum wages to keep pace with the cost of living increases, so other regions may also adjust their wage standards later this year.

That being said, 2020 might see fewer wage increases than usual given the coronavirus pandemic, which has shifted the need to reduce the financial burden on enterprise and job stabilisation to the forefront. The reorientation of priorities are also set against the backdrop of an ongoing US-China trade war and an economic slowdown.

Regions may opt to freeze local wages in order to maintain their economic competitiveness amid the uncertainty.

Currently, the highest minimum wages are in parts of Guangdong, Jiangsu, and Zhejiang provinces, which have all surpassed the RMB 2,000 (US$289) mark, as well as in the municipalities of Beijing, Shanghai, Shenzhen, and Tianjin.

Shanghai continues to have the highest minimum wage in China, at RMB 2,480 (US$358) per month, followed by Shenzhen and Beijing, both at RMB 2,200 (US$318) per month.

At the lowest end, the minimum wage in certain rural areas of Liaoning (RMB 1,120/US$162), Hunan (RMB 1,130/US$163), and Anhui (RMB 1,150/US$166) slightly higher.

However, while China is still among the most unequal countries in the world in terms of income inequality, it has made some progress over the past decade.

According to China’s National Bureau of Statistics, the country’s Gini Coefficient dropped from 0.491 in 2008 to 0.465 in 2016, where a higher number denotes greater inequality.

Impact on China’s labour costs

Minimum wages only tell part of the story of labour costs in China. As China’s economy moves up the value chain and transitions to innovation and services, most workers employed by foreign-invested enterprises earn above the minimum wage. For example, workers in Shanghai made an average of RMB 9,723 (US$1,405) per month through the first quarter of 2019 – over four times the local minimum wage.

Moreover, employer social insurance and housing fund obligations add an additional 37.25 percent to an employee’s salary on average. China’s rapidly rising wages are partly explained by the country’s labor pool which, while enormous, is gradually shrinking.

In 2018, China’s employed population declined for the first time ever, falling by 540,000 to a total of 776 million. This trend is exacerbated in China’s wealthy coastal regions – a traditional hotbed of foreign investment and manufacturing – which migrant workers are leaving in favour of inland China.

According to the National Bureau of Statistics, in 2016 the migrant worker population in coastal provinces fell by 0.3 percent, while that of Western provinces grew by 5.3 percent.

For foreign investors, rising wages are an unavoidable feature of doing business in China. Nevertheless, when other factors like productivity, infrastructure, transportation costs and access to a massive domestic market are considered, China may still emerge as the more cost-efficient option compared to countries with lower statutory labour costs.

When comparing locations for foreign investment into China, minimum wages are a helpful barometer to gauge labour costs across different regions.

From there, identifying industry-specific wage levels, availability of talent, and access to regional incentives offer a more nuanced view of ultimate labour costs within a given region.

This article was first published by China Briefing

The post What’s the minimum wage in China? appeared first on Focus - China Britain Business Council.