Lu, whose skin is tanned and his navy suit jacket faded from the sun, says he is standing taller these days as he surveys his many options at a state-funded job fair in Shanghai following the annual Lunar New Year holiday.

"Nowadays it's not easy to find an experienced worker like me," the 25-year-old Lu, who worked at a package printing factory in the eastern province of Anhui for five years, said proudly.

China's vast worker pool, which has powered the explosive growth of its labour-intensive exports over the past decade, is tightening up, analysts say. That means that, while dissatisfied migrant workers are still seen as a source of potential unrest, power is tilting from employers to employees like Lu.

"The firm where I used to work has called me several times to ask me back. But their salary raise is not satisfying and I want a job in Shanghai just like my wife," Lu said, after casually asking a recruiter about wages.

Lu's former employer offered him 3,800 yuan ($578) a month, a 27 percent raise, but he aims to earn 4,000 yuan and says he will "keep looking around until I find an ideal job".

Chinese manufacturers and local governments are vying for the services of people like Lu as the labour crunch -- the first signs of which surfaced in 2007 -- has spread from coastal export powerhouse zones to the rural heartland.

The shortage is the result of three decades of rapid economic expansion colliding with demographic changes due to China's one-child policy, economists say.

"The overall story is clear -- thanks to the decline in births 20 years ago, China's labour pool will likely stop expanding in size very soon," Stephen Green, an economist with Standard Chartered Bank, said in a research note.

The impact is especially felt after the Chinese New Year holiday when many workers leave their jobs and do not come back. Outside Shanghai's main train station, a giant electronic billboard welcomed migrant workers to the city after the holiday.

Labour woes in the world's second-largest economy made waves last year after Toyota, Honda and other foreign manufacturers were hit by a rare spate of strikes as workers demanded higher wages. Many ended up offering salary hikes.

Once the disputes tapered off, a growing number of companies started looking at moving factories inland and offering migrant workers jobs nearer to their hometowns in the countryside, so as to improve employee morale.

"I am returning home and won't come back," 21-year-old Jiang Buyi, who just quit his job at an electronics factory in Shanghai, told AFP as he waited outside a bus station, taking a bite from a McDonald's hamburger.

"I am young and have a long way to go. So I need to pick up some skills. I'm going to learn how to do car repairs at a relative's shop," said Jiang, who is from Sichuan province in the southwest, a traditional source of migrant labour.

"Most of my co-workers are returning home to look for jobs too. A minimal salary increase here is nothing. Prices are rising faster than my wages," he said.

Employers are feeling the effects of such sentiments. At the Shanghai job fair, Teng Kewu, an office director for machinery maker Shanghai Shenlong Enterprise, said: "I am under much bigger pressure this year as many southern companies are investing inland and attracting locals."

In his own home town in Anhui, he said, authorities were helping local firms recruit by sending buses into the streets to bring people to job fairs.

"Hundreds of job seekers came around and the pay level has improved a lot compared with last year," the veteran recruiter said, but added that after three days, he had yet to meet his target of signing up 80 people.

In addition to salary hikes, his company is spending money on setting up matchmaking events with nearby clothing factories, where workers are mostly female, in an effort to retain its young male staff.

Mo Rong, a senior researcher with the Ministry of Human Resources and Social Security, played down concerns about a labour crunch, saying plenty of workers were willing to work for firms that offer higher pay.

Shen Jianguang, a Hong Kong-based economist with Mizuho Securities, argued the labour shortage, expected to plague China in coming years, provides opportunities as well as challenges for the country's economy.

"It is an illustration that it is increasingly pressing for China to shift its growth pattern... Only when the low-scale, labour-intensive sectors are scaled back will the problem ease, which has yet to come," Shen said.

earlier related report
HSBC eyes moving HQ to Hong Kong: report
London (AFP) March 6, 2011 - Asia-focused banking giant HSBC is considering quitting London for Hong Kong in a shock move, said The Sunday Telegraph newspaper.

Britain's biggest bank, which has been headquartered in London for 19 years, has warned key investors that it is looking at moving to Hong Kong due to the levels of tax and red tape, the broadsheet said.

The group was founded in Hong Kong and Shanghai in 1865 and the bank regards Asia as its most important region.

If HSBC left, it would be a severe blow to the British government which is relying on a private-sector-led economic recovery, The Sunday Telegraph said.

It survived the financial crisis without needing a government bailout.

The newspaper said it paid 1.2 billion pounds ($2 billion, 1.4 billion euros) in British taxes last year and employs 52,000 people.

"HSBC has a review of its domicile every three years. Normally it's a formality. This time we were told that a move is now more than likely," one source described as a top institutional investor in HSBC told the broadsheet.

Another shareholder was quoted as saying: "Instinctively we were very surprised by the change of tone. But you can't argue with the numbers. Moving to Hong Kong could deliver a 30 percent premium (to the share price) overnight."

The bank reviews its domicile every three years to check whether London still makes the most sense strategically and financially, the weekly said.

A rise in operating costs, tied to an increase in financial regulations, has left HSBC looking more closely at the conditions in Hong Kong, the report suggested.

An HSBC spokesman said: "London is ideally positioned as an international financial centre and we have been clear that it is our preference to remain headquartered here.

"However, we are routinely asked by institutional investors about the costs of being headquartered in the UK and it's clear that the City's competitive position needs protection."

HSBC said Monday that its net profit more than doubled to $13.16 billion (9.56 billion euros) last year as bad debts plunged to the lowest level since 2006.

Pre-tax profits soared 170 percent to $19 billion in 2010, while loan impairments and other credit risk provisions dived 47 percent to $14.04 billion. Revenues rose 3.1 percent to $68.3 billion.

"Underlying financial performance continued to improve in 2010," HSBC chief executive Stuart Gulliver said in the results statement.

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