Wage growth in foreign companies was between 16 and 17 per cent in 2005, the second highest wage increase in China.

But Liu warned that other workers, especially migrant workers in the private sector, are still poorly paid.

He cited documents from his institute that showed in the manufacturing sector, wage increases lagged behind GDP growth by 5 percentage points every year between 1998 and 2003.

Some factories have not given a pay raise to their workers for four to five years.

In contrast, employees of State-owned enterprises, government organizations and publicly-funded institutions have seen continual income increases.

The latest statistics from National Bureau of Statistics indicate the average income for people working in the State sector rose by 16 per cent year on year for the first quarter of this year.

At the same time, foreign companies based in China are feeling the pinch.

"We foreign companies have been increasingly losing our advantage as our Chinese competitors can now compete with us by paying higher wages," said James Jao, chief executive officer of J.A.O. Design International Architects & Planners Ltd.

An architect was paid 8,000 yuan (US$1,000) a month three years ago, but now he can get 20,000 yuan (US$2,500), said Jao.