Could China's gain become its workers' loss?

As Chinese workers return to work after Chinese New Year, Abi Rushton reflects on the implications for workers' rights of the migration of business from China to Latin America.

Rising wages in China are pushing businesses towards Latin America - what will this mean for Chinese workers wanting to improve their lot? Is China's domestic market ready to fill the production capacity gap? And if it does, what will happen to worker rights? Without an international light to shine on practices within China's giant manufacturing capacity, will workers lose or gain?

As far back as 2005 analysts have been predicting that Latin America will benefit from rising costs in China. In 2008 the American Chamber of commerce (AmCham) announced that following its annual survey of member companies, rising costs in China were forcing some US manufacturing firms to leave the country. To confirm this, in January Reuters reported that US-based manufacturer Meco Corporation had moved production from China to Mexico. The decision to move was based on the fact that wages at Meco's Chinese operations had more than doubled since 2007.

Chinese New Year (CNY) is the annual trigger for everyone's minds to turn to the subject of Chinese wage levels. Writing this during CNY there is more on my mind than the traditional labour markets and labour shortages following the celebrations. Ten metre high LED advertising boards erected outside Shanghai train station show that market forces are affecting wage rates for returning migrant workers again this year, as employers work increasingly hard to attract labour.

What's on my mind is how conditions other than wages will be improved if international investors are moving to closer or lower-cost markets.

Supply and demand is a fairly straightforward equation when it comes to wage levels. What is not so transparent are other conditions, for example working environment, hours, benefits, treatment of staff and grievance procedures. Improvements in these fields have largely been brought about through the influence of international brands and investors requiring transparency and improved standards to meet their own codes of conduct.

If international investors continue to move operations out of China due to rising costs, who will remain to ensure working conditions are independently monitored, and hopefully improved? Many developing economies have seen the creation of a two-tier manufacturing sector with conditions in export companies significantly better than those supplying the domestic market. As domestic markets for consumer goods grow, will this lead to poorer conditions for higher numbers of workers?

Could China's economic boom and changing consumer patterns unwittingly lead to poorer conditions for its workers as domestic orders begin to fill the gaps left by exiting international firms?

As we wait for the labour markets to take full effect there are conflicting reports of oversupply of both jobs and labour. However reports in China Economic Review indicate that new jobs are set to grow at a higher rate than new labour in the coming years; predicted to be 3 million new workers per year between 2011 and 2015 compared to 10 million a year for the last decade. This at least gives a positive indication for Chinese workers, as whether they continue to make for Western export companies or domestic Chinese businesses, if there is a labour shortage they will still have some bargaining power to improve their lot in the coming years.