Labor shortages on the coast suggest that the fruits of economic development are finally trickling inland

Who would believe it? Manufacturers in China's export heartlands are complaining that they cannot find enough workers.

From the factory towns of Dongguan to the trestle tables of Wenzhou, bosses are moaning about labor shortages. Suzhou reported 150,000-200,000 job vacancies in September, while vacancies in Shenzhen rose from 23,000 in April to 120,000 in August.

Back in the heady days of 30% export growth, labor shortages were an understandable phenomenon. Greedy US consumers, who couldn't wait to buy the latest Made-in-China clothes or gadgets, simply slapped the bill on their credit cards. But the good old days, as everyone keeps on telling us, have gone. The US savings rate has crept into positive territory, and the British are now saving more than the famously frugal Japanese.

One would think, therefore, that finding enough hands to churn out goods would be a thing of the past. After all, for the past year the stories from China's export sector have been unremittingly grim. The financial typhoon that swept across eastern seaboard last autumn floored thousands of weaker manufacturers, and more than 20 million migrant workers lost their jobs in factories.

Although the mass factory closures and lay-offs failed to generate the social chaos predicted by many excitable commentators, the gloom shrouding the factory towns of the Pearl and Yangtze River deltas has failed to lift. Exports remain more than 20% below their level of a year ago.

So what is going on? The quick answer is that factory managers were caught on the hop by a late surge in Christmas orders. Ordinarily, Christmas comes in July - but this year the deluge arrived in August and September. Factory managers who would once have hired short-term workers to make up the shortfall are now reluctant to push up wages or take on new staff because they fear that the surge in orders will prove short-lived.

More interestingly, however, there is growing evidence that fewer migrant workers see jobs in coastal factories as the only means of making a decent living.

According to a survey by CCTV, around 70% of the migrants who lost their jobs at the beginning of this year have not returned to the coast. Some have taken construction jobs in the interior created by fiscal stimulus programs, while others have found work in the nascent rural service sector.

Since the relative cost of living remains high for migrant workers on the coast and wages remain depressed, there is little incentive for them to move back. Thanks in no small part to the current leadership's decision to plow investment into rural areas and waive taxes on farmers, the wage gap between the coast and the interior has narrowed considerably over the past few years. The countryside is still a tough place to be, but there are growing opportunities to make a living there.

The growth of big interior cities such as Wuhan, Chongqing and Chengdu also means that migrant laborers have a more convenient alternative to moving all the way to Shenzhen or Wuxi.

The re-emergence of labor shortages on the coast is a headache for factory bosses - but it is a positive sign that the fruits of economic development are finally trickling inland. It may sound strange, but labor shortages are good news.