Despite All Their 'Cheap' Labor, the Chinese Embrace Robots Too

Those who still think China has a never-ending army of cheap labor should think again. Chinese wages are rising, the population is aging - and China’s government is promoting a robot revolution in manufacturing.

Over each of the next three years, the growth of the use of robots in China is estimated to exceed 20 percent. Rising wages - driven by decades of growth - are eating into profits, pushing companies to shift manufacturing to Southeast Asia. Shanghai’s minimum monthly wage is two-and-a-half times what it was a decade ago.

Meanwhile, China’s aging population is declining, leaving companies with fewer workers to draw on - projected to decline from almost a billion today to as few as 800 million by the middle of this century.

At the same time, China is pushing to enter manufacturing sectors that require industrial robots, such as semiconductors.

China’s answer to shifting demographics, higher wages and changing opportunities is largely based on far more extensive use of industrial robots in production. The number of industrial robots used in China nearly doubled between 2005 and 2017. Last year, China bought more than a third of the world’s robots. In 2017, China purchased more industrial robots by far than any other country - about 140,000 industrial robots, more than three times as many as Japan and four times as many as the United States.

Good examples of China’s dramatically increased use of robots include manufacturer Foxconn and retail giant Alibaba. Between 2012 and 2016, even as Foxconn’s operating revenue increased, its job count declined by almost a third. The company shed more than 400,000 jobs, replaced by Foxbots, especially designed to meet the company’s needs. Foxconn is targeting further increases in its use of robotics, now aimed at reaching 30 percent of production by 2020.

Meanwhile, Alibaba has opened China’s biggest robot-dominated warehouse to help deal with upcoming Singles Day demand. The ecommerce monolith is deploying over 700 robots to support the online shopping festival. The robots automatically move parcels across the huge warehouse, to the dispatch centre where they are picked up by a delivery firm. While some humans work beside the robots, the company intends to eventually fully automate the plant and other locations.

In addition to purchasing robots, Chinese companies are also ramping up domestic production of them. With the support of the national and local governments, roughly 3,000 companies making robots or providing robotics solutions launched between 2014 and 2016.

China’s robot revolution demonstrates two things: 1) Far from hoarding jobs, China is improving productivity. 2) Robots do not steal jobs - they create opportunities to beef up a 21st century workforce.

Robots are not peculiar to mature economies. Rather, they are recognized as assets by all economies, and will soon perform hundreds of millions of jobs, freeing human talent to do what it does best - pursue abstract thought that plays the leading edge role in creating wealth.