The pros and cons of rising labor costs

When Premier Wen Jiabao repeatedly mentioned raising income levels and improving social welfare during his annual government work report on Monday, some people were happy, others not.

Wen is sending a message to all Chinese companies that they should raise their employees' salaries and pay more for their medical treatment and housing on an annual basis.

However, at a time when global demand has slackened and the Chinese economy is slowing down, this is likely to have a harsh impact on small and medium-sized private enterprises, which make a major contribution to the Chinese economy, as it will mean increasing labor costs and business operation pressures.