Guidelines for wages cautioned

* Chen Jieping, deputy director of Social Security Department at the All-China Federation of Trade Unions, said migrant workers are the most vulnerable group.

* Yang Yansui, director of the Institute of Social Policy Study at Tsinghua University, said pay cuts should be permitted to help ease pressure on employers.

Despite signs of economic recovery, millions of workers face wage cuts and freezes under new salary guidelines.

Experts, however, have warned that the guidelines - which are not mandatory but are an important reference point for employers - could have a significant impact on domestic consumption, and could widen the gap between rich and poor.

Guangdong province became the first in the country to set the minimum salary increase at 0, or negative, this year.

Shanghai, Tianjin, Shanxi, Qinghai, Yunnan, Jilin and Hunan also established guidelines, usually published by June.

Of those, only Tianjin kept the rate of increase steady. The other municipalities lowered the suggested rate of increase.

Meanwhile, in the Pearl River Delta city of Shenzhen, where thousands of export companies are based, the highest-level and medium-level benchmarks stand at 23,700 yuan ($3,470) and 2,460 yuan per month, respectively, decreasing by 8.5 percent and 3.9 percent each from last year.

Chen Jieping, deputy director of Social Security Department at the All-China Federation of Trade Unions told China Economy Weekly that other provinces should be cautious about recommending that wages be cut or frozen.

"Migrant workers are the most vulnerable group," Chen said. "It will widen the income gap and it will do no good to boost consumption if many provinces take the similar approach."

But Yang Yansui, director of the Institute of Social Policy Study at Tsinghua University, said pay cuts should be permitted to help ease pressure on employers.

"Annual salary increases are not necessary for every enterprise and there are many other ways to improve workers' welfare, such as providing more benefits and public services," she said.

China established the salary guideline system in 1999 to provide employers with suggestions, based on local economic growth, price inflation and labor demand. The guidelines are particularly popular among foreign-owned businesses.

Labor researcher Liu Junsheng, with the Ministry of Human Resources and Social Security, said many export businesses are struggling to survive.

"They are facing huge pressure to raise salaries. These guidelines can help ease their worries and avoid the increasing income gaps in order to maintain social stability," Liu said.

Liu said orders had dropped by between 30 percent and 80 percent at some export businesses. "Most of the employers can maintain the basic salary, but the employees are not getting overtime pay, one of the main income sources, due to the lack of orders," he said.

More than 20 percent of businesses in Guangdong, which were hard hit by the economic crisis, closed by the end of last year, estimates have shown.

After the government approved 4-trillion yuan ($586 billion) stimulus package, economic growth increased 7.9 percent in the last quarter, up from 6.1 percent in the previous quarter.

But the unemployment situation in China is still "grave" and the global financial situation has not bottomed out, said Wang Yadong, deputy director of the Employment Promotion Department of the Ministry.

A recent survey by the human resources firm Mercer found that 12.5 percent of Chinese firms were having salary freezes, compared with 14 percent in the previous half-year.

About half of those firms amended pension plans because of recent reforms, especially in the financial, manufacturing and pharmaceutical sectors.

"People in China today are greatly concerned about the security of their jobs, as well as their annual salary increases," Frank Lin, managing director of Mercer in Greater China, said.

Wang Nianhong, general manager of a footwear company in Guangzhou's Baiyun district, said lowering the salary level was among the last things she wanted to do.

"In that case, employees may lose confidence in the development prospect of my business," she said. "I take a very cautious attitude toward the issue, despite the new salary guideline."

Zhao Weiping, a human resources director of a toy factory in the Pearl River Delta boomtown of Donguan, said that using the excuse of the guideline to reduce wages was "foolish".