The demand for labor affects many parts of the country. According to Zhou Dewen, president of Wenzhou SME (small-medium enterprises) Development Association, Wenzhou City in Zhejiang Province will need 350,000 workers this year and Zhejiang Province will need about 700,000 workers.

In Zhou's opinion, with the continuous development of Wenzhou enterprises, together with Hubei, Chongqing, Sichuan and other central and western regions' competing for workers, the labor shortage in eastern region will be intensified in the coming years, especially for coastal areas.

To tackle with labor shortage, companies have exhausted every means to keep workers. The general practice has been salary increases and this has marked a transition in the Chinese economy.

"China's economic development has entered a turning point. The era of cheap labor is coming to an end." Zhou said.

Nearly 70 percent of companies are compelled to increase salary, yet profits aren't growing at the same rate, so Zhou believes increased pay will worsen the situation. Zhou says in order to maintain the vitality and development momentum, companies should focus on technical, management and marketing innovation that could in turn improve both the product quality and labor productivity.

Accelerating industrial upgrades and restructuring the industry are the fundamental ways to solve labor shortage. However, for most companies, the transition is by no means easy.

"Over the years, Wenzhou has been exploring the road for industrial upgrading and restructuring; however, no remarkable achievement was made," Zhou said.

According to him, most of the small and medium-sized enterprises in Wenzhou are struggling to survive. They lack sufficient resources needed for industrial upgrading. He estimated that for a long time in the future, traditional industries in Wenzhou won't finish their transformation, and that the government should guide SMEs to develop scientifically.

According to Zhou, local governments should encourage companies to unite and form industrial unions and guide the leading companies to integrate with smaller ones. In this way, the industry will be improved and the product process will be more streamlined, and thus labor will be saved and the companies will be more competitive.

(This article was first published in National Business Daily and translated by Li Huiru)