High-end manufacturing holds the key

Li Huaying, owner of the Shanghai Litan job agency, said it is becoming increasingly difficult to fill the lower-paying positions, as workers' demands are higher than expectations.

"It is becoming difficult for a company to hire an ordinary worker without any specific skills for a monthly salary of 2,000 yuan, as the salary is deemed to be unacceptable for migrant workers in Shanghai," Li said.

Lu Ming, an economics professor with Shanghai Jiao Tong University, said that what worries him most is that the latest round of wage increases is the result of insufficient labor supply, rather than the result of productivity increases.

"A healthy scenario is that people want to increase their salaries or find a job with stronger fulfillment so that they can go to colleges and get more training. This helps enhance skills and improve productivity," Lu said. "Currently, this does not seem to be the case in China."

Zhou, however, said that higher labor costs are a good thing as they create pressure on Chinese manufacturers to improve their efficiency, upgrade their products and move up the value chain.

"The truth is that you have to create more value, or else you will die."

For foreign manufacturers who have a huge workforce, rising wages are not necessarily a lead sinker that would threaten their survival, if managed smartly, experts say.