Rapid increases in real wages reflect a healthy economy

There are lots of astonishing numbers about the Chinese economy. For example, China used more concrete in 2010 to 2013 than the United States used in the entire 20th century. Its continuously high GDP growth rates for more than 35 years are unmatched in history. But the most impressive number is the growth rate of wages.

Real wages (adjusted for inflation) in China went up on average 11 percent a year from 1995 to 2015. This means the real living standard of the average Chinese worker multiplied more than 8 times in 20 years - doubling about every six years, and changing to an incredible extent the lifestyles and opportunities of workers.

But China's wages are determined by market forces. Chinese businesses could not pay the higher wages if they had not moved into higher value-added businesses. The real wage increase has been made possible by a continuous process of rapid business reform. In fact, the wages force businesses to innovate, so there is a positive feedback process. The wage growth also ensures there is rapidly growing domestic demand for Chinese products.