Where to start

Consumption is a function of income, wealth, and expectations. The recent adjustment of the minimum wage in Guangdong Province signals a new phase in wage policy. Guangzhou and Shenzhen have seen their minimum wages rise to 2,680 yuan and 2,700 yuan per month, respectively, while cities like Zhuhai, Foshan, Dongguan, and Zhongshan have increased to 2,300 yuan per month, marking a 6-8% rise. According to regulations, the minimum wage should be adjusted at least every two years. The last nationwide adjustment occurred in 2025, with several provinces raising wages by over 10%. After more than a year, Guangdong has taken the lead, kicking off a new round of wage hikes, with most provinces expected to follow suit by the end of the year.

It's worth noting that the minimum wage is not applied uniformly across the board. Instead, it is divided into two to four tiers based on regional development levels. Provincial capitals typically fall into the first tier, economically strong cities into the second, and less developed regions into the third and fourth tiers. Guangdong exemplifies this approach: Guangzhou and Shenzhen occupy the first tier, cities like Foshan, Dongguan, Zhuhai, and Zhongshan are in the second tier, while the eastern, western, and northern parts of Guangdong are grouped into the third tier, each with different standards. Even Jiangsu, known for its "thirteen prefectures," divides into three tiers, with the third covering numerous counties and districts in northern Jiangsu, such as Lianyungang, Huai'an, Yancheng, and Suqian.

Specifically, Guangdong's first-tier minimum wage is second only to Shanghai's, surpassing that of Jiangsu and Zhejiang, but its second and third-tier regions lag behind the more developed areas of the Yangtze River Delta. This is understandable, given Guangdong's status as an economic powerhouse with both a prosperous Pearl River Delta and less developed eastern, western, and northern regions, making a one-size-fits-all minimum wage impractical. The reason is clear: the minimum wage represents both employee income and employer costs. If it exceeds the level of economic development, it could hinder stable employment. Conversely, if some regions deliberately lower the minimum wage to attract investment and industrial transfer, it might reduce business costs but would not benefit overall welfare. Thus, steadily raising the minimum wage is not merely an option for local governments but a bottom line that must be upheld.

Why raising the minimum wage matters

Raising the minimum wage does not necessarily mean that everyone's salary will increase accordingly, nor does it guarantee a comprehensive rise in income. However, as the baseline for wage levels, the minimum wage is not only about protecting the interests of vulnerable groups but also affects the vast majority of people. While the wage level has a transmission effect, a rise in the lower limit could trigger a chain reaction, benefiting all wage earners. More importantly, the minimum wage serves as a reference benchmark for unemployment insurance, sick leave pay, overtime pay, flexible employment, and wage guidance lines.

It should be noted that the social insurance base is determined by the average social wage, not the minimum wage, with the former being three to five times the latter. Looking ahead, raising the minimum wage is just the beginning; "increasing wages" as a top-level design is now being implemented. Recently, the "Expanding Consumption in the 15th Five-Year Plan" proposed implementing an urban and rural residents' income increase plan, diversifying channels to boost residents' property income, and steadily raising the minimum wage standard. Last year, documents from the Central Committee of the Communist Party and the State Council emphasized improving the reasonable wage growth mechanism for enterprises. According to incomplete statistics, more than 10 important documents or meetings have focused on income growth, wage increases, and pension hikes as core keywords since last year.

Wage increases garner attention because more than 60% of residents' income comes from wages, making it the primary source for most people. Income is a function of consumption, and the fundamental way to expand consumption lies in boosting income. The key question is not whether people are willing to consume, but whether they dare to consume and can afford to consume. Raising income is based on wages, but property income is also essential. In China, property income from real estate and stocks accounts for less than 10% of total income, compared to around 20% in Europe and the United States, leaving room for improvement. Clearly, raising the minimum wage is just a prerequisite; strengthening the wage growth system, increasing property income, and stabilizing pension income are equally critical.

From lifting the low to adjusting the high: the ripple effects begin

China's income reform strategy can be summarized in six words: lift the low, expand the middle, and adjust the high. This involves increasing the income of low-income groups, expanding the size of the middle-income group, and regulating excessively high incomes, all while both growing the economic pie and distributing it fairly. Recently, following last year's requirement for overseas stock investments to pay back taxes, regulators have begun enforcing individual income tax on overseas insurance and offshore trusts. This is a tax adjustment targeting high-net-worth individuals. In other countries, inheritance taxes, capital gains taxes, and property taxes have long been in place.

Similarly, salary caps for the financial industry and state-owned enterprise executives are gradually being implemented. The 15th Five-Year Plan for Human Resources and Social Security proposes deepening the reform of salary distribution systems for state-owned enterprise leaders, regulating unjustifiably high incomes, and strictly managing compensation at all levels. Salary cuts in the financial sector are no longer news. According to 2025 financial reports, many bank executives have seen salary reductions of over 20%, and the legend of "annual salaries exceeding one million yuan" for securities industry personnel has faded. Of course, salary caps are not about a one-size-fits-all egalitarianism. What is truly being limited is fixed compensation tied to positions and levels, rather than value created through labor, technology, and innovation. This is clearly reflected in national documents: promoting higher pay for those who work more, have higher skills, and innovate more, guiding wage distribution to tilt toward front-line positions.

These "front-line positions" primarily refer to those in production, technology, research, and public services, benefiting grassroots technical staff and middle-level managers. In the future, "lifting the low, expanding the middle, and adjusting the high" will be an inevitable trend, and everyone must adapt to the new landscape.