A Study On The Impact Of The Increase Of Labor Cost On The Upgrading Of China 's Manufacturing Industry

Manufacturing industry is the national economic foundation, which directly influences other business of a country. The importance of manufacturing industry is mainly reflected in two aspects: first, it can create a abundant material basis for a country; second, it can provide equipment for new high-tech industries. Since the founding of New China(especially since the opening-up reform), China’s manufacturing industry has had rapid development, which is a strong impetus to the industrialization and modernization of China, enhancing China’s comprehensive national power significantly. However, with the rise of labor costs in recent years, “labor shortage” in coastal areas gradually increases enterprises’ operating costs, and export products are low value-added, which decreases China’s international competitiveness. And, this challenge has a negative impact on China’s overall economic development. Then, Li(2015) first proposed the ambitious plan of “Made in China 2025” in his government work report of China’s two sessions. The plan not only means to promote the transformation and upgrading of China’s traditional manufacturing industry and keep it’s development healthy and stable, but also means to realize the leap forward development of China’s manufacturing industry in new technological revolutions and achieve the dream of “The world love made-in-China”.Based on China’s reality, this paper focuses on comparative and empirical studies to verify the influence route of rising manufacturing labor costs on the upgrading of manufacturing industry structure. Labor productivity(manufacturing added-value/ number of employees in manufacturing) is set as explained variable, and six economic indicators(manufacturing labor costs, labor inputs, technology level, capital investment, Engel coefficient and GDP) are set as explanatory variables to set a regression model and select time series data to go through ADF unit root test and co-integration analysis. After dividing 29 specific manufacturing industries into three categories(labor intensive, capital intensive, and technology intensive), separated regression analyses and results show that rising labor costs of different categories of manufacturing industries have different impacts on the upgrading of manufacturing industry structure.Based on the results of empirical and comparative analysis, suggestions such as making full use of China’s human capital continually, increasing investments in technology innovation to promote manufacturing industry upgrading, improving the protection of labor rights and increasing worker’s incomes are brought up in this paper.