Labor union authorities in south China's Guangzhou city have ordered Global Fortune 500 companies running business locally to put in place the collective salary negotiation system within the year.

Chen Weiguang, head of the Guangzhou city federation of trade unions, said Thursday the agency will meet company executives or send working groups to push hard for collective salary negotiation if any Fortune 500 company failed to comply before the deadline.

The global Fortune 500 companies have about 600 subsidiaries in Guangdong Province, mainly in Guangzhou, the provincial capital, and Shenzhen.

The last two years saw sporadic strikes at mainly foreign-funded enterprises in Guangdong, dubbed as "factory of the world" for its labor-intensive manufacturing industry.

Workers demanded pay rises as a result of rising living costs and severe labor shortage. In most cases, they got pay hikes after collective negotiation with company managers.

Many foreign businesses themselves also acknowledged that the collective salary negotiation system is a must.

The past couple of years have witnessed severe labor shortage and work stoppage and this prompted the company to build a reasonable pay increase mechanism and an effective negotiation platform, said Jiang Bin, vice chairman of the trade union at Panasonic Electric and Electronic Material (Guangzhou) Co.

Jiang said the employer is also willing to talk with the union to ensure stable and smooth operations.

A trade union official at Omron (Guangzhou) Automotive Electronics Co., which embraced the collective negotiation system after ending a workers' strike in 2010 with a pay rise, said that the system is a win-win for both companies and workers.