Base salaries among emerging economies in the Association of Southeast Asian Nations (ASEAN) are substantially lower than those in mainland China, which is losing its labor-cost competitiveness to them, according to new research by Willis Towers Watson.

China’s base salaries across all job grades are between 5% and 44% higher than in Indonesia, which is the most expensive labor market among the emerging ASEAN economies (including the Philippines, Vietnam, Malaysia, Thailand and Indonesia).

The report shows that entry-level, white-collar professionals in China receive, on average, an annual base salary of $21,000, 30% more than their peers in Indonesia who receive $16,000.

At the professional and middle management levels, average base salaries in Vietnam and the Philippines are the lowest in ASEAN and therefore lag far behind those of China. For example, average base salaries at the professional level in China are 1.9 to 2.2 times those of the Philippines and Vietnam.

The largest differential is at the middle management level, with China paying 44% more than Indonesia, a gap that narrows to 28% and 5% at the senior management and top management level, respectively.

Among the emerging Asean countries, Malaysia and Thailand are the lowest payers at the senior management and top management levels. For senior management, China pays approximately 1.9 times that of Malaysia, while for top management it pays 1.6 times that of Thailand.

“The lower salaries in these ASEAN countries give them a competitive edge and there’s evidence that it is leading companies to reconsider where they locate operations once based in China, where an aging population and shrinking workforce suggest salaries will remain higher,” said Sambhav Rakyan, data services practice leader fo Asia Pacific at Willis Towers Watson.

“China is focusing more on R&D and more higher-end value-added production, which requires a higher skill-set,” said Rakyan. “For that reason, along with proximity to other parts of the supply chain, although China is much more expensive, its more mature infrastructure and skilled workforce will likely continue to attract companies particularly when compared with ASEAN’s emerging economies. By Enterprise Innovation editors, 22 April 2016