Chinese manufacturing; betting its future on robots

While on a recent trip to China, I read in the local China Daily that Zhejiang Province, a manufacturing hub that neighbors the commercial capital of Shanghai, would invest a staggering $82 billion over the next five years to encourage manufacturers to adopt more robots; this in order to overcome the short supply and high cost of labor that currently prevails in the coastal areas of China. The program is apparently already underway and will assist at least 5,000 companies a year, according to a source with the investment division of the Zhejiang Economic and Information Commission quoted by the newspaper.

According to a study recently carried out by the Commission, more than 60 percent of enterprises it surveyed have reduced production line employees by at least 10 percent, while 16 percent of the firms have cut their production jobs by more than 30 percent. Meanwhile, robots have helped these factories improve productivity by more than 10 percent. The report also quotes robot supplier ABB saying that with increasing awareness of health and safety, replacing workers with robots in dangerous and unhealthy environments and using them in more creative jobs will be an "inevitable choice" for manufacturers. From numerous visits to plastics processing plants in China, I vouch see that the sector has ample scope to install more automation.

An automated future for China.

So the future for industrial robot makers in China looks bright. It is expected to become the world's largest market in the next few years, and with current penetration at 21 robots per 10,000 workers versus a global average of 55, and nearly 350 in Japan and South Korea, future growth looks certain.

The average annual labor cost in Zhejiang Province has tripled since 2005 to almost $6,800, making the locale more expensive than many developing Asian countries. And Zhejiang isn't the only province to experience such skyrocketing personnel costs. Further, despite China's recent announcement to partially relax its one-child policy, the ratio of workers to retirees is forecast to continue to fall over the next 20 years from 5.1 to 2.1. Part of this is also due to highly skewed ratio of boys to girls at birth; 117.7 to 100. The size of the workforce in China has in fact been falling since 2010 and recovery is not anticipated for at least a generation. 'So whichever way you look at it, the Mainland's manufacturing sector is certain to become more robotized in the coming decades.

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