Multinational companies establishing low-cost operations in Asia face higher wage costs in China than in India, according to a study of more than 600 companies in the two countries.

Some senior managers and professionals in China earn more than double the rates paid to Indian managers, the study by Mercer Human Resource Consulting concluded.

However, it said increased demand for highly skilled Indian workers was threatening to mop up much of the available local supply and force up pay rates.

"Although wage costs are lower in India, there is a high demand for skilled workers there, particularly at the executive level," said Mark Sullivan, worldwide partner at Mercer.

"If demand continues to outweigh supply then we can expect wages to increase substantially over the next few years."

Average pay rates have risen 11.5 per cent in India in the past five years compared with 7.5 per cent in China.

India, according to the study, had "an enviable pool of high-quality, talented professionals" and the largest population of English speakers outside the US, while, says the study. China had successfully attracted foreign manufacturers with its production facilities and low-cost labour.

China was now "acclaimed as the world's preferred manufacturing spot, companies are increasingly looking to outsource their back-office operations to these countries to reduce overheads", the report said.

Annual salaries of Indian project managers averaged $10,039 compared with $23,409 in China.

The pay of Chinese financial analysts, at $13,194, also outstripped Indian salaries of $8,408 for the same job.

Living costs in Chinese cities were much higher than in India and "compensation levels of over 100 per cent of Indian pay levels" were abundant in Beijing, "particularly for senior level marketing, IT, human resources and logistics positions".

Chinese pay was higher for 95 per cent of the 42 jobs considered in the study. But pay differentials were "less stark at lower levels". Chinese skilled production workers earned $2,334 a year and customer care assistants $2,418, compared with $1,853 and $1,601 respectively in India.

Mercer said wage costs were only one factor that needed to be considered when deciding where to outsource operations.

Companies also needed "to weigh up other operational costs, as well as factors such as proximity to markets to determine the most cost-effective option".

- Financial Times