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Even with Chinese factory wages up more than 20 percent this year, the country’s labor shortage is already forcing some plants to turn away business. That underscores the reality behind the Foxconn suicides and the strikes at Honda: Chinese factory managers have no idea what their employees really want, migrant workers from the countryside are quitting jobs faster than before and high turnover is hindering productivity growth. To stay competitive, China’s manufacturers will have to do more than just increase salaries in their coastal plants, automate and move inland in search of lower labor, land and utility costs. Factories will have to change the way they manage their workforce.

Don’t believe me? Ask Fang. Less than a year into her job at a shoe factory in Wenzhou, she’s thinking about quitting. Fang wants higher wages, shorter hours and better working conditions. But ultimately what she wants are skills and responsibility.

She dreams of opening a store, of being her own boss. Managing her own business, Fang shouts into her cell phone over the din of machines on the assembly line, “would be better than this. It would give me an opportunity to improve myself.”

Lei, a 21-year-old migrant worker from rural Shaanxi province, would agree. She quit her job making bicycles in the northern city of Tianjin last year, in part, because she couldn’t see herself moving up in the company.

At her new job as a quality inspector of mining equipment in western Xi’an, Lei earns half what she could make in a factory in southern China, but the plant offers training in quality control after work.

“The salary is low, but the work I do here has value,” she says. She plans to quit next year and find a job where her new skills will command a higher salary.

Fang and Lei aren’t the exception, they’re the rule. A recent survey of 5,000 migrant workers in Shenzhen by the All-China Federation of Trade Unions found that workers under 30 changed jobs twice as often as their older colleagues.

Another ACFTU survey of migrants in 10 cities showed that the younger the worker, the less important money was as a motivation to migrate.

Better educated than the generation that staffed China’s factories in the 1990s, many migrants today are disappointed by assembly-line jobs that offer few transferable skills and little prospect for advancement.

Migrants’ legal status as rural residents under China’s hukou system means they face both discrimination and higher costs for medical care, housing and education of their children in the cities, where most would prefer to live.

Government studies show that migrants put in longer hours but earn less than local workers, thus many keep moving in a perpetual search for a better situation.

Their peripatetic ways are a drag on productivity and efficiency. A constantly changing workforce devours management resources: every new employee must be trained, and it takes time for them to improve their output.

As production runs get shorter, the lack of a stable workforce will be fatal for some factories. Think about cameras or sneakers.

Companies used to release a new point-and-shoot camera or redesigned running shoes every 12 or 18 months. Now, electronics and shoe brands are constantly updating their product lines.

Back in China, the assembly lines that make these products need to be able to make one product for a few months and then switch to another. That is impossible to do well, or for long, without a stable workforce.

What does this all mean? That as seductive as automation may sound, there is a limit to how much can be done by machine on today’s production lines. China still needs its migrant laborers.

At the same time, high turnover is creating an artificial labor shortage, adding to the bottleneck in supply caused by the 1979 one-child policy.

Companies and regions that understand this new reality and find ways to attract and retain talent from China’s shrinking, increasingly picky migrant labor pool will outperform their peers.

To improve productivity, manufacturers will need to invest in training for their workers, including on subjects like starting a business.

Labor advocates say there are no publicly traded manufacturers in China that get this yet. Some will eventually figure it out.

Until they do, companies like Yum! Brands Inc, which invests in employee development at its KFC and Pizza Hut fast- food restaurants, offer a better alternative.

Chinese cities and regions have competed for decades on luring foreign investors. Now, they will compete on attracting and keeping migrants.

The city of Chongqing is experimenting with allowing migrants from surrounding rural areas to convert to urban residence permits.

If properly implemented, this might help Chongqing achieve higher growth with a more stable workforce and help companies such as machine toolmaker Chongqing Machinery & Electric.

While it’s tempting to think that manufacturers most affected by this summer of discontent will be a safer bet, it’s not necessarily true.

Taiwanese and Hong Kong manufacturers won’t fare well unless they promote from worker ranks, rather than bringing in managers from home.

Manufacturers like Foxconn that think one-time wage rises, suicide nets and pep rallies are the answer to workers’ concerns about the future don’t get it.

Scaremongers say that China’s rising wages will undermine its competitive advantage. The reality is there is no other country today that can offer a supply chain comparable to China’s; the alternative to China is China.

Even if wages rise another 20 percent, China’s migrant army still works for a fraction of the wage an American or European would expect.

The challenge, for China and the companies that depend on its factories, is finding a way to keep those workers happy and staying in the one place for longer.President Susilo Bambang Yudhoyono got a first-hand taste of the deficiencies in the country’s telecommunications industry while assessing traffic flows at an Idul Fitri police post in Cikampek.

The city’s traffic congestion is about to return to normal as millions of residents return from their long holiday.

The president was discussing traffic flows with Central Java Police Chief Insp. Gen. Edward Aritonang when the telecommunications system broke down.

Visibly angry, the president ordered his staff to send a message to the directors of Telkomsel, the country’s leading cellular provider, and its parent company Telkom, to ensure that all systems functioned properly.

The president did not mince his words, saying: “Tell them, ‘don’t just sit behind your desks. Make sure the systems function.’ ”

Although Telkomsel has replied by noting that it was not its system being used, the incident reflects a wider problem facing the information technology sector.

Years of underinvestment in telecommunications infrastructure has now come home to roost, with the country facing a chronic deficit in communications and connectivity.

Although the number of mobile subscribers has rocketed past 100 million, the telcos have been slow to follow suit by investing heavily in better services or creative solutions to customers.

Sadly, the industry is too fixated on competing on a network level, as evidenced by the move by Bakrie Telecom to absorb Telkom Flexi, a unit of Telkomsel. Both companies provide budget cellular telephone services for about 23 million customers.

The deal will allow Bakrie Telecom to increase its network, but no mention was made if services would also be improved.

As such, the industry has not moved beyond viewing telecommunications as hard infrastructure, while in more developed economies, the competition is on services and creative competition.

Indonesia’s highly regulated environment makes it difficult for newer and smaller firms to enter the market and compete with the big boys.

The information technology sector is critical to future economic development. Some of the subsectors that offer considerable potential include WiMAX-related technologies and solutions; mobile content; banking and finance solutions; and radio communications.

The current environment is far from conducive for companies that offer creative solutions to customers in meeting their IT needs. This must change if the economy is to grow faster.

The future will be determined by how well the country is connected and how good its IT services are.

The sector was liberalized after the 1998 financial crisis as the government realized its monopolistic hold on the sector was counterproductive.

Over the past decade, the sector has grown by leaps and bounds but it is now time to take the next big step: focusing on services rather than pure networks.