Premier Wen Jiabao has just given Chinese workers at Japanese factories a mid-Autumn festival gift to go along with their mooncakes. He's told their Japanese bosses to pay them more.
China-based HR executives at companies from Honda to Mitsubishi are now likely huddling in conference rooms trying to figure out how to respond to Wen's instructions.
Their options have just narrowed. It's a fair bet that disgruntled Chinese workers at the more miserly Japanese companies are already mobilizing for a battle over pay and conditions, in which they can be confident of government backing. If management takes them on, they've effectively picked a fight with the Chinese leadership.
Anti-Japanese sentiment bubbles just below the surface in China, so Wen's order carries an implicit threat. The subtext of his message to less-than-generous Japanese factory operators: Disregard this order at your peril. Over the next few weeks and months, expect the Chinese media to start pumping out stories detailing the hardships suffered by Chinese employees at the hands of their recalcitrant Japanese bosses. After all, Wen has just declared open season on the Japanese investment sector.
Beijing has plenty of good reasons to nudge manufacturing wages higher. For one, it wants to encourage consumption, and an easy way to do that is to put more money in workers' pockets.
But what are the benchmarks, beyond minimum salaries mandated by local governments? Salary comparatives are hard to come by in China. Sure, some Japanese employers have a reputation for being low payers. But, anecdotally, so do some Korean and Taiwanese companies. And surely, stingy Chinese employers are vastly more numerous than Japanese ones. Horror stories abound of Chinese factory owners refusing to pay their workers at all.
Picking on the Japanese, perhaps the most vulnerable group of investors in China, is a useful way to bring other foreign employers into line. By standing on his bully pulpit to drive wages higher, Wen has highlighted the real problems of workers in China: inadequate legal protections and a lack of institutions--including independent labor unions--capable of representing their interests and mediating in disputes with management.
Until that problem is addressed, Japanese executives trying to set appropriate salaries in China will have to read the political winds as carefully as the inflation data.