Gains for regional economies as China moves from cheap labour

China’s base salaries across all job grades are between 47 and 65 per cent higher than in Thailand. They are between 5 and 44 per cent higher than in Indonesia, which is the most expensive labour market among the emerging Asean economies (including Thailand, Philippines, Vietnam, Malaysia and Indonesia) covered in the research. The report also covers Singapore, but this market is regarded as a developed economy.
The findings in the Asia Pacific section of Willis Towers Watson’s 2015/2016 Global 50 Remuneration Planning Report enable cross-country pay competitiveness comparisons across the region, by providing base salary information using a consistent framework for job levels. The report also sheds light on the impact of currency movements on base salaries in US dollar terms.
Among the emerging Asean countries, Thailand and Malaysia are the lowest payers at the top management and senior management levels, respectively. For top management, China pays 1.6 times that of Thailand, while for senior management it pays approximately 1.9 times that of Malaysia.
Furthermore, the report revealed that entry-level white-collar professionals in China receive, on average, an annual base salary of approximately $20,680, around 47 per cent more than their peers in Thailand, who receive approximately $14,087. The largest differential is at the top management level, with China paying 65 per cent more than Thailand, a gap that narrows to 54 per cent and 50 per cent at the senior management and middle management level, respectively.
In addition, among Asean’s emerging economies, Thailand offers average pay rates across the professional, middle and senior management levels, except at the top management level for which the country has the lowest salaries.

No longer a selling point
“This report clearly shows that low labour cost is no longer a strong selling point for China, while it continues to encourage foreign investment. Nowadays, all Asean countries are cheaper than China in terms of salaries and overall labour costs, making these countries more attractive to foreign investors,” explained Ms Pichpajee Saichuae, Managing Director of Willis Towers Watson Thailand.
“Moreover, this research tells us that among Asean countries, Thailand provides a significant advantage in terms of human resources costs, when compared to its Asian peers, giving it a competitive edge. This is an important element that might push a number of international companies to reconsider where to locate their operations in Asia,” she added.
At the professional and middle management levels, average base salaries in Vietnam and the Philippines are the lowest in Asean and therefore lag far behind those of China.
“China is focusing more on R&D and more higher-end value-added production, which requires a higher skill-set. For that reason, along with proximity to other parts of the supply chain, although China is much more expensive, its more mature infrastructure and skilled workforce will likely continue to attract companies, particularly when compared with Asean’s emerging economies, said Sambhav Rakyan, Data Services Practice Leader, Asia Pacific at Willis Towers Watson.
Although Indonesia stands out among Asean’s emerging economies for having the highest base salaries, it lags far behind the most developed economy in the region, Singapore. The pay gaps are even significantly wider when comparing Thailand with Singapore. Base salaries across all job levels in Singapore are approximately 97 per cent-228 per cent higher than those of Thailand.
Across the job grades from professional level to top management, base salaries in Singapore are approximately 3 per cent-10 per cent higher than those of Hong Kong, which is the highest paying economy in Greater China.
Singapore pays 28 per cent-52 per cent more than China at the middle management to senior and top management levels. The largest gap is at the professional level where Singapore pays more than twice that of China.