When we think of Chinese manufacturing, we imagine thousands of low-skilled workers putting in long hours for minimum pay on the factory floor. The face of China’s workplace, however, has been changing and now what we see hustling seamlessly about the workplace are robots, large pre-preprogramed monsters that have moved in to take the place of former low paid workers.
China’s robotic revolution was a necessary response to the country’s pressing economic problems. From the 1980s onwards, when Beijing’s Communist rulers opened up its borders to global trade, it was the country’s enormous, cheap workforce that drove the country to become the world’s biggest exporter of manufactured goods. Hundreds of millions of Chinese migrated from the countryside to the city and the wide job availability lifted them out of poverty.
But the growing middle class and an ageing population as well as waning interest in low level jobs has caused wages to zoom up 253% over the last ten years, eroding China’s competitive advantage after decades of unstoppable growth. For these reasons as well as China’s one-child policy, formally phased out in 2015, the country’s working-age population is expected to fall from one billion people last year to 960 million in 2030 and 800 million by 2050.
Robots as a Solution
Automation has proven to be the most effective remedy to China’s financial situation and China has moved up the ladder with unprecedented speed. It is now the biggest user of industrial robots in the world, having taken over the lead from Japan last year.
Robots have proven invaluable in cutting down production time while saving on worker expenses. At one computer parts manufacturer, it would have taken 40 people one hour to produce 800 computer mice just three years ago. With the introduction of robots, the same manufacturer employs only 10 people to produce the same results.
In addition to saving time and costs, robots cut down on mistakes resulting from human error and also acts to eliminate problems that may be caused by high staff turnover. There are now several Chinese companies that have begun producing their own robots, cutting their costs by 30-40% from imported ones and offering advanced services such as custom designs and colors at the request of their customers.
Despite the reduced costs of home-made robots, many Chinese manufacturers prefer to order their man-made workers from producers outside the country. But this may change quickly. Local governments are offering manufacturers subsidies of over $150 billion over the next few years to entice them to replace their workers with locally produced robots. Part of Beijing’s overall goal for the Chinese economy is to put these displaced workers to use in the country’s growing service sector.
Drawbacks to Robotics
There are, of course, drawbacks to China’s robot revolution. More than 40 per cent of its 1.4 billion population continue to live in the countryside, many in poverty, and they have not benefited much from the urban economic phenomenon. The government is hoping that the benefits of promoting cutting-edge manufacturing will outweigh the damage from the potential jobs lost. The industrial strategy announced by Beijing last year — known as Made in China 2025 — is designed to improve the technological capability of its factories while supporting the development of Chinese brands internationally. In addition, according to one analyst, as Chinese companies try to increase their exports to alleviate the impact of the domestic slowdown, they are likely to focus more on the quality of their products.
The spread of robots may be beneficial for China but it makes it more difficult for emerging countries to move towards economic growth and the benefits of the robot revolution will not be shared equally across the world. Developing countries such as Indonesia and Egypt have long hoped to follow the example of China, as well as Japan, South Korea and Taiwan that have successfully stimulated job creation and economic growth by moving agricultural workers into low-cost factories to make goods for export. The rise of automation, however, is likely to generate significantly fewer jobs for the next generation of emerging economies and they will not have the same possibility of achieving quick growth by shifting workers from farms to higher-paying factory jobs.
As it looks now, nothing can stop the robot stampede. Boston Consulting Group forecasts that the percentage of tasks handled by advanced robots will rise from 8 per cent today to 26 per cent by the end of the decade, driven by China, Germany, Japan, South Korea and the US, which together will account for 80 per cent of robot purchases. They point to Moore’s Law, which posits that computing power could double every 18 months to two years. According to one analyst at the group, “Even if you’re very good, humans can only double their productivity at best every 10 years.” In contrast, he estimates that researchers can push robots to double their productivity every four years and “….compounded over time, that makes a big difference.”