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UNCLAS SECTION 01 OF 03 GUANGZHOU 014846 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EAP/CM, DRL/IL 
DEPARTMENT PASS USTR FOR KARESH, ROSENBERG 
LABOR FOR ILAB HELM, LI ZHAO, SCHOEPFLE 
TREASURY FOR OASIA/INA-DOHNER AND KOEPKE 
USDOC FOR 4420/ITA/MAC/MCQUEEN 
GENEVA FOR CHAMBERLIN 
USPACOM FOR FPA 
 
E.O. 12958: N/A 
TAGS: ELAB ECON EINV SOCI EAGR CH
SUBJECT: XIAMEN'S ECONOMIC AND LABOR SITUATION: RISING WAGES 
TO WOO MUCH-NEEDED WORKERS 
 
 
(U)  THIS DOCUMENT IS SENSITIVE BUT UNCLASSIFIED.  PLEASE 
PROTECT ACCORDINGLY.  NOT FOR RELEASE OUTSIDE U.S. 
GOVERNMENT CHANNELS.  NOT FOR INTERNET PUBLICATION. 
 
¶1. (SBU) Summary.  Xiamen is Fujian's economic powerhouse, 
but like many highly developed coastal cities, it suffers 
from labor shortages in certain sectors.  The manufacturing 
sector remains its principal job provider, but its service 
industry is quickly gaining ground.  Average wages in the 
city grew almost 10% during 2005, with farmers sharing in 
the gains, as their income grew at more than 10%. 
Meanwhile, there is a clear disconnect between Xiamen's idle 
workers and its work vacancies, as the city's unemployment 
rate stands at 3.79%, yet only half of the nearly one 
million jobs offered in Xiamen during 2005 were filled. 
This provides an opportunity for young migrants from 
neighboring rural provinces, who join the foreigners that 
have come to invest in highly visible enterprises in the 
city.  Skilled technical workers remain in short supply, and 
Xiamen is competing with other developed coastal cities to 
attract these workers through higher wages and the 
reputation as one of China's most livable cities.  End 
summary. 
 
¶2. (SBU) On April 28, Deputy Director General Wu Xuexiang, 
of Xiamen's Labor and Social Security Bureau, discussed 
economic and labor issues in Xiamen.  Also present at the 
meeting were Cai Donghong, chief of the employment and 
unemployment insurance section, and other officials who did 
not add to the discussion.  According to the official 
statistics for the end of 2005, Xiamen's workforce numbered 
1.395 million, having grown by 190,000 during the year.  The 
city's total population was 2.25 million and its gross 
domestic product (GDP) was RMB 102.955 billion (USD 12.861 
billion).  The city is a Special Economic Zone (SEZ) and is 
being considered as a possible location for an American 
Presence Post (APP). 
 
Industrial sector is tops, service sector closing in 
--------------------------------------------- ------- 
 
¶3. (U) The secondary industry's workforce grew by 77,000 in 
2005, to reach 660,000, or over 47% of the city's total 
workforce.  For its part, the tertiary industry employed 
about 558,000 people, or 40% of the overall workforce, 
having added some 135,000 new jobs during 2005.  Meanwhile, 
the primary industry lost 19,000 jobs in 2005, for a 
workforce of 176,000 at the end of 2005.  In 2005, the 
average contribution to GDP of a secondary-sector worker was 
RMB 86,683 (USD 10,820), while that of a tertiary-sector 
worker was RMB 78,292 (USD 9,774).  Labor-intensive 
agriculture occupied 13% of the city's workforce, yet only 
produced 2% of GDP. 
 
¶4. (SBU) Although the secondary sector still employs 102,000 
more employees, the growth rate of the tertiary sector's 
employee roll was more than twice as fast (31.9%, compared 
with 13.2%).  Even allowing for some slowdown, the service 
sector could at least equal the manufacturing sector in 
terms of workers.  However, it will take longer for the 
former to match the latter's contribution to GDP. 
 
Average wages up almost 10% 
--------------------------- 
 
¶5. (U) Total wages paid in 2005 reached RMB 15 billion (USD 
1.87 million), up 27.1% year-on-year.  Xiamen officials 
attribute this growth to a corresponding growth in the size 
of the city's workforce, in addition to rising wage rates. 
Average wages in Xiamen grew 9.92% during 2005 to reach RMB 
22,577 (USD 2,820).  The per capita income of farmers grew 
 
GUANGZHOU 00014846  002 OF 003 
 
 
10.3% to RMB 6,230 (about USD 778). 
 
¶6. (U) The average wages in the primary industry grew 10.33% 
to RMB 13,585 (USD 1,697).  Meanwhile, average wages in the 
secondary industry grew to RMB 18,013 (USD 2,250), up 6.91%. 
Finally, those in the tertiary industry grew 12.74% to RMB 
35,079 (USD 4,382). 
 
Unemployment, reemployment, and no employment 
--------------------------------------------- 
 
¶7. (SBU) The unemployment rate in Xiamen for 2005 was 3.79%. 
This rate compares favorably to China's 4.2% rate and 
Fujian's 4.0%.  However, it compares less favorably to 
Guangzhou's 2.08%.  During the year, 224,000 laid-off 
workers were reemployed.  Of these, just 3,600, or 1.6%, 
were over the age of 40.  Xiamen also offered vocational 
training to 26,000 people.  Despite the unemployment rate, 
of the 920,000 jobs offered in 2005, 460,000, or half, went 
unfilled.  It appears that Xiamen's surplus labor is not of 
the kind that its booming economy needs.  Likely, those that 
have fallen by the wayside are mostly older workers that 
companies do not care to train, calculating that they will 
not be able to get much work out of them before they retire. 
 
Insurance coverage 
------------------ 
 
¶8. (U) 840,000, or over 60%, of Xiamen's workforce were 
covered by medical insurance; 780,000 (55.9%) by pension 
insurance; 680,000 (48.7%) by unemployment insurance; 
630,000 (45.2%) by industrial injury insurance; and 210,000 
(15.1%) by birth insurance.  RMB 3.6 billion (USD 450 
billion) worth of employment-related insurance premiums were 
collected in Xiamen during 2005. 
 
From China... 
------------- 
 
¶9. (SBU) Like in China's other boomtowns, much of the labor 
behind Xiamen's economic success has come from poorer, 
inland provinces.  The main providers of labor are Jiangxi, 
Chongqing, Sichuan, Guizhou, Guangxi and Hunan.  Contrary to 
the case in Guangzhou and Shenzhen -- where many migrants 
come from other parts of Guangdong province -- the rest of 
Fujian was not mentioned as a significant source of labor. 
Anecdotally, however, it seems a notable proportion of 
Xiamen's service-sector professionals hail from Quanzhou, 
Fujian's third-most important city, after Xiamen and its 
capital Fuzhou. 
 
... And Beyond 
-------------- 
 
¶10. (SBU) About 1,200 foreigners are part of Xiamen's 
workforce.  These include more than 70 Americans, whose 
principal places of employment are the local Dell and Kodak 
factories.  Meanwhile, with a small resident population, 
Singapore typically punches above its weight, holding key 
investments in the hotel and entertainment sectors. 
Additionally, some 2,000 people from Taiwan work in Xiamen, 
mostly in the electronics, rubber, food-and-beverage, and 
real estate industries.  Xiamen is also home to some 500 
Hong Kongers and Macanese.  Hong Kong interests own more 
than half the shares of TAECO, a leading aircraft- 
maintenance company that does work for giants such as Japan 
Airlines and Lufthansa, and which carried out the first 
conversion of an aircraft from passenger to cargo use in 
China. 
 
Jinmen: Xiamen's "golden door" to Taiwan? 
 
GUANGZHOU 00014846  003 OF 003 
 
 
----------------------------------------- 
 
¶11. (SBU) Ferries between Xiamen and the nearby island of 
Jinmen (which in Chinese means "golden door") are part of 
the "mini three links" between the Mainland and Taiwan- 
controlled islands of Jinmen (Kinmen or Quemoy) and Mazu 
(Matsu).  They are called "mini" to distinguish them from 
the regular "three links" (postal, transport and trade), 
which currently do not exist between the Mainland and Taiwan 
proper.  This has proved a boon to people from Taiwan that 
happen to live in Xiamen, by allowing them to travel back to 
Taiwan with much more ease than their counterparts in other 
Mainland locations, who must fly via an intermediate 
location, typically Hong Kong or Macau.  However, the ferry 
has not yet demonstrated its worth as a trade link. 
 
¶12. (SBU) From Jinmen there are multiple daily flights to 
Taipei and other destinations in Taiwan, and many of these 
are scheduled to take in passengers coming in on the Xiamen 
ferries, which take less than two hours.  Airlines based in 
Taiwan have offices in Xiamen's ferry terminal.  Meanwhile, 
pilgrims from Taiwan use the Xiamen ferry during visits to 
worship the goddess Mazu (Matsu), protectress of fishermen 
and seafarers, at her home temple on Fujian's Meizhou 
Island. 
 
Comment: Not enough workers 
--------------------------- 
 
¶13. (SBU) Like the rest of the developed coastal cities in 
Fujian and nearby Guangdong, Xiamen is suffering from an 
inadequate supply of labor for its hi-tech sector.  This is 
good news for skilled workers, as factories have been 
raising their wages to increase retention and attract new 
workers.  The labor shortage, ironic in a country with 
millions of unemployed and underemployed citizens, is very 
much due to a misallocation of educational resources.  While 
there has been a huge surge of students graduating from 
universities in the past few years, it appears that fewer 
are headed into technical fields.  While investors may think 
twice about investing in Xiamen if they fear they will be 
faced with insufficient skilled labor, this is a problem 
that China as a whole is facing. 
 
¶14. (SBU) While not entirely good news for the city's 
economy, the wage increases serve to move the city's 
manufacturers up the value chain and ultimately bring about 
economic transfers to inland provinces from whence the 
migrants originate, in the form of remittances and savings 
taken back by returnees, as well as by the reduction of the 
population base to which the authorities back home must 
provide services.  Nonetheless, for now, and despite rising 
wages, Xiamen is competing with other cities also struggling 
to attract a limited number of skilled and hi-tech workers. 
 
DONG