German Companies in China: Lower wage increase

Beijing/Shanghai/Guangzhou – The German Chamber of Commerce in China has published the 16th edition of the Labor Market & Salary Report together with Direct HR.

“German companies have offered lower salary increases in 2023 as originally planned, which reflects the cautious approach we’re seeing in the Chinese market.” says Ulf Reinhardt, Chairperson of the German Chamber of Commerce in China – South & Southwest China. He adds: “The prospect of even smaller salary increases in 2024 is concerning and suggests ongoing difficulties in the market.”

Key Findings: 

Expected salary growth for 2024 hits three-year low: German companies operating in China expect a 4.49% salary growth for 2024, which is 0.39 percentage points below the 2023
projection. This marks the fourth consecutive year of below-five-percent wage growth.

Effective salary growth in 2023 below projections: In 2023, effective salaries increased by 4.76%, slightly lower than the initial projection of 4.88%. This marks the first time in three years that
effective salaries have fallen below expectations.

Only the automotive sector beats salary projections in 2023: Automotive is the sole industry to report effective salary growth higher than expected in 2023, at 4.79% as compared to the initial
projection of 4.56%. While the salary projections in the machinery and industrial equipment sector were met, wages in all other industries came in lower than forecasted.

Share of companies employing foreigners hits all-time low: In 2023, the percentage of foreigners employed by German companies in China hit an all-time low of 69.5%, down 6.7 percentage points from pre-pandemic levels. (Figure 3) Local employees are most likely to take over mid-level management and technical roles, while top management positions are the least likely to be filled by locals.

Higher compensation remains the main reason for the replacement of foreign workers: 60.3% of German companies name differences in compensation as the main reason for replacing foreign
employees. Meanwhile, 26.4% reported facing difficulties in attracting foreign employees.

About the Labor Market & Salary Report 

The 16th edition of the Labor Market & Salary Report is published by the German Chamber of Commerce in partnership with Direct HR. Based on an online survey conducted between May 10
and June 8, 2023, the report received responses from 524 member companies of the Chamber.

The report is a valuable resource for executives and HR professionals of German companies in China. It provides a comprehensive benchmark of the wage developments in China, as well as the latest trends and hottest topics in the Chinese labor market.

About the German Chamber of Commerce in China 

The German Chamber of Commerce in China currently has more than 2,100 members and is the official member organization for German companies in China. It helps its members to thrive in
the Chinese market by providing relevant market intelligence and practical guidance. It offers a platform for the Sino-German business community and advocates for its members’ interests toward stakeholders, including government bodies and the public.