Salaries in China surged last year and are expected to increase further this year, according to a survey conducted by global human resources firm Mercer Human Resources Consulting.

The survey showed wages in China rose an average 7.94 percent year-on-year in 2006. And Mercer estimated salaries would continue to increase by 7.7 percent in 2007.

Wages in China's oil and IT industries saw a substantial increase of 8.3 percent last year.

The survey covered 1,800 domestic and foreign enter-prises in industries including high-tech, IT, pharmaceuticals, manufacturing, retail, auto, oil and finance.

Shanghai saw the strongest pay surge, with average wages increasing 7.7 percent. Guangzhou and Beijing followed at 7.6 percent and 7.2 percent respectively.

For the high-tech industry, salaries increased in Shanghai, Guangzhou and Beijing 7.3 percent, 6.9 percent and 6.5 percent respectively.

Car industry wages climbed 8.3 percent, 7.9 percent and 7.8 percent respectively in Shanghai, Guangzhou and Beijing.

Mercer's survey was carried out in 13 Chinese cities including Beijing, Shanghai and Guangzhou, and second-tier cities such as North China's Tianjin Municipality, Nanjing and Suzhou in East China's Jiangsu Province, as well as Dalian in Northeast China's Liaoning Province.

The survey also showed that salaries of mid-level managerial staff climbed 8.5 percent, much higher than the average of all employees interviewed.

Middle managers' pay increased 8.7 percent, 8.6 percent and 8.4 percent in Shanghai, Guangzhou and Beijing respectively last year.

But despite higher pay, middle managers preferred to job hop according to the survey, indicating they were the most sought-after employees in the job market.

Salary and remuneration packages have become a key factor for employees, said Brenda Wilson, managing director of Mercer China.

"Employers are faced with two great pressures the drain of excellent employees and increasing salary costs," said Wilson.

Analysts said that given the competitive employment climate, employers needed to find more efficient tools to retain high-caliber staff. A decent salary and attractive remuneration package were considered the most common measures.

"Employers realize they should adopt a new talent introduction and retaining mechanism," said Wilson. She said this would involve recognizing outstanding employees by widening the salary gap, formulating a quick-response pay adjusting system, and providing good conditions such as flexible working hours.