China fact of the day

by on June 3, 2014 at 2:15 pm in Uncategorized | Permalink

China, once the manual labour “workshop of the world”, has become the largest buyer of industrial robots, as rising wage costs and growing competition from emerging economies have forced manufacturers to turn to technology.

The country bought one in five robots sold globally in 2013, overtaking tech-savvy Japan for the first time, in its attempt to drive productivity gains.

…“China has the fastest-growing robot market. In a few years time China will be significantly larger than the second and third largest robot market,” said Per Vegard Nerseth, head of robotics for ABB.

There is more here, from the FT.

dead serious June 3, 2014 at 2:34 pm

Now that China’s all played out, what’s the next China?

Deep South?

Benny Lava June 3, 2014 at 2:48 pm

Southeast Asia, then possibly Africa. Just a guess, but when you look at labor costs signs point south and west.

JWatts June 3, 2014 at 4:27 pm

Southeast Asia and India of course. But Africa lacks enough infrastructure and/or government to be competitive. Labor is only one cost of many, and a good chunk of Africa isn’t competitive even at a Zero labor rate.

I’m not including resource extraction industries, of course, because that’s a different matter.

dead serious June 3, 2014 at 4:34 pm

I sort of ruled out Africa and India for the infrastructure reasons. Roads in most of the country are absolutely horrendous and the nation suffers from a poor energy grid.

Africa, same but worse.

I was wondering about Indonesia.

Doug June 3, 2014 at 4:59 pm

There have been numerous previous attempts to bring mid to high value-chain manufacturing to Indonesia and it’s always failed. Transport issues are on par with Africa, but with much higher wages. Additionally corruption, ease of doing business and labor rigidity are very poor relative to Indonesia’s wage level. Vietnam offers better infra and transport, much more ease of doing business, and closer access to China and East Asia, all at half the wages of Indonesia.

Doug June 3, 2014 at 5:00 pm
ChrisA June 4, 2014 at 9:18 am

Doug, while I agree that corruption is an issue, I don’t think that is necessarily holding Indonesia back. The main issue is around some silly nationalism, the establishment is still highly mercantilist, and don’t really get that trading makes you better off. That said, Jakarta is booming, high rise offices and apartment buildings springing up all over the place, and many high end malls too. I think Indonesia’s time has come.
By the way, I don’t buy the thesis that China was only successful because of low wages, China was successful because they have clever people and moved to a market based economy. The low wages was just a phase they had to move through before they became a middle income country,

Doug June 3, 2014 at 4:30 pm

The problem with Africa is how many countries are cheaper than China and not total basket cases. Botswana, South Africa, and the Saharan countries already have higher labor costs than China. Nigeria, Ghana, Kenya, Tanzania and Ethiopia are probably in the sweet spot, poor enough to compete on costs but not totally dysfunctional. The problem is their wages are lower than China, but not that much lower than Western China, and the lack of infra and transport compared to China drives the cost up.

Below that level, there’s probably not any hope for the poorer countries. No sane person is going to make a fixed capital investment in the DRC, Zimbabwe, Mozambique or Somalia. Rwanda’s a slam dunk, really low wages and Paul Kagame runs the country like clockwork. But it’s only 12 million people, it’s not going to absorb even a sliver of Chinese manufacturing before getting rich fast. Overall I predict you’ll see the era of rapidly falling prices for manufactured goods to come to an end. On the flip side though resource prices should get cheap.

Brett June 3, 2014 at 5:44 pm

Tanzania seems like the best candidate. China already has long-standing ties (they built a railroad there decades ago), they’ve got companies over there building stuff and buying natural resources, and it’s on the Indian Ocean with a stable government. That’s a problem that Rwanda has aside from its small size – it’s inland and requires transportation through neighboring countries.

Benny Lava June 3, 2014 at 7:26 pm

Good criticisms of Africa, but I see glimmers of hope. First is that China is investing in infrastructure in Africa in exchange for mineral rights. Additionally there are a few African nations with some political stability and willingness to do business. I am specifically looking at W. Africa: Senegal, Cameroon, Ghana, etc.

But I can also see things not panning out. After all there are plenty of Central Asian republics with cheap labor.

So Much For Subtlety June 4, 2014 at 12:39 am

I am surprised no one has mentioned the obvious solution – China should move a billion or two Africans, South and South-East Asians to Shanghai.

Africa lacks competent government and basic infrastructure, but Hong Kong doesn’t. So move the workers.

After all, I bet the Ethiopian food in Beijing is crap.

ChrisA June 4, 2014 at 9:20 am

Africans and Chinese differ in many ways, not just in institutions.

carlospln June 5, 2014 at 12:17 am

The CHI food in Beijing is crap.

Brett June 3, 2014 at 5:41 pm

Southeast Asia, most likely. Chinese companies might do some of it out of African countries on the east coast of Africa, but transportation and power supplies tend to be a concern.

And of course, there’s automation. Chinese labor is still pretty cheap compared to US labor, so you might just end up with Chinese Labor + More Robots instead of most stuff moving to even cheaper poor countries.

JWatts June 3, 2014 at 2:39 pm

I think those statistics are fraught with uncertainly. The biggest being on how you define a robot. For example, from the article:

“Many Chinese companies would still rather watch somebody break their back trying to lift a heavy box than pay for an expensive lifting table,” said Pilar Dieter, who heads Solidiance’s Asia Pacific practice”.

US car plants are full of heavy lift assistors. They aren’t classified as robots. http://www.ergonomicpartners.com/default.aspx

I think looking at capital expenditures on factory automation is probably a much more reliable indicator. After all it’s somewhat silly to classify a pallet stacking device with an articulated arm as a “robot”, but a device that uses conveyors, pushers and an elevator to do the exact same thing as a “palletizer”. Why do we consider “robots” as more important than “palletizers”?

Chris S June 3, 2014 at 8:03 pm

+1

sch June 3, 2014 at 3:30 pm

They are getting away from setups such as in this popular video from a few years ago: http://www.youtube.com/watch?v=W_YnaHNcISw
Six workers sitting inside of a large punch press moving what look like dog feeding bowls from one station to the next.

Yankuba June 3, 2014 at 4:45 pm

What will all the Chinese workers do when the robots take their jobs?

Thor June 3, 2014 at 10:05 pm

The Army, I’m afraid.

It’s not like they can all get married or anything…

JWatts June 4, 2014 at 10:51 am

Robots are 100% Loyal to the Party. Disaffected workers are not. So, I’m thinking they won’t be welcomed into the Army. However, Robotic soldiers will have no moral qualms about keeping the populace in line.

Tom June 3, 2014 at 5:17 pm

It’s funny that Americans and Europeans are the ones wringing their hands about all the menial jobs they’ll lose to robots, when actually they already lost those jobs to the Chinese, who will gladly let robots have them.

guest June 4, 2014 at 2:45 am

the unemployed are never glad they lost their jobs. Its going to be interesting to watch China’s industrial employment de-humanize, since they are poorer, have less social services and less access to women than their developed world counterparts theyll probably be a lot angrier too.

Mark Thorson June 4, 2014 at 10:07 am

And the profits will go to liberal arts majors.

http://www.dilbert.com/strips/comic/2014-06-04/

JWatts June 4, 2014 at 10:51 am

LOL, I just saw this today and printed it out.

Tom June 5, 2014 at 1:04 am

China is automating and increasing employment simultaneously. Automation will not result in mass layoffs, it will result in much higher productivity. The problem is they will consume a lot more energy.

Even in an advanced country that can’t expect to match China’s pace of growth, there’s no reason to fear automation. The pace of automation’s advance is relatively moderate. With a reasonably diversified economy there aren’t the sudden big changes of labor use that there were back in Ludd’s day.

We’re still very far from the day when automation leads to such high productivity that people will prefer fewer average working hours. I say bring it on.

adanac June 3, 2014 at 6:32 pm

Communist China takes billions out of Africa and cheat the African people, their wages. Read of:

Mugabe, the Communist China Red Army and China’s blood diamonds.
Sept 17/2010
dailymail.co.uk

One of the things China is very afraid of is, an uprising of the Chinese people if they have no jobs and can’t feed their families. The everyday Chinese people, work for the State. China has to keep encroaching into other countries, to keep their people working. I can’t see China using robotics. China did turn their machine guns, on their own people and mowed them down.

In one province in China, their minimum wage is $236 per month. Harper has permitted Communist China to set up shop, right onto our Canadian soil. Communist China is a menace around the globe.

China has polluted much of their farmland and 40% of their water. Dead pigs come floating down China’s rivers. China’s rivers stink so badly, people gag. Harper is selling Canada’s resources and resource jobs to Communist China. China is also buying up our Canadian farms. Now we can have dead pigs, floating down our rivers too.

Chris S June 3, 2014 at 8:07 pm

Dead pigs were a common sight floating down Chicago’s rivers, 100 years ago. Pittsburg was so polluted you couldn’t see the sun in the daytime. Industrially developing countries go through phases. Hopefully China’s people become affluent enough to demand – and afford – clean air and water in less time than North America.

The China-in-Canada bit is a bit beyond me, even though I spend much of my life less than 50 miles from Canada.

B Cole June 3, 2014 at 8:57 pm

Thailand is becoming a msnufacturing platform, of course not China-size. BTW, anecdotal: Filipino girls are showing up in China, working as caregivers.

twothree June 3, 2014 at 9:22 pm

The next China is China. Rising wages and increasing productivity are going hand in hand in China. Low wage countries will not be able to compete.

Bill June 3, 2014 at 9:28 pm

The Petersen Institute tells me that Chinese robots work for less pay.

LOL June 4, 2014 at 12:00 am

Whites are dirty pink monkeys.

Bill June 4, 2014 at 7:17 am

Spoken like a true robot.

dixie June 4, 2014 at 1:10 am

Marc Andreessen on robots eating jobs,
https://storify.com/jgilliam/pmarca-robots-jobs

JWatts June 4, 2014 at 9:47 am

That was a pretty good series of tweets.

Rahul June 4, 2014 at 1:14 am

They can be the largest users of labor & robots both at once, can’t they?

Axa June 4, 2014 at 5:21 am

Wages are not the reason to buy a robot but productivity.

JWatts June 4, 2014 at 11:04 am

Factory automation certainly increases productivity, but that allows the factory to have fewer workers for a given output. And fewer workers lowers overall employee compensation, even if wages tend to be higher for the remaining workers. So, high wages (really total compensation) induce owners to employ factory automation to increase the productivity of their work force.

andao June 4, 2014 at 10:39 am

I don’t think scale is all that important. I’ve been to lots of Chinese factories, and the largest probably had 3000 workers. You don’t need a hundred million people to have dominant industry position. Volkswagen somehow manages to compete with auto producing countries that are 5x it’s size.

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