Like most industrialized countries today, China is facing a shortage of skilled workers. The urgent need to reduce the workforce and increase productivity has prompted Beijing to come up with a solution: install more industrial robots in factories. However, this won’t help.
In order to improve production lines that can produce higher value products, China’s Ministry of Industry and Information Technology released the Robot Plus Application Plan last month. It has a clear goal: to double the density of robots in the industrial sector by 2025 from 246 per 10,000 workers in 2020. The plan proposes to expand the use of machines to include hydroelectric, wind farms and critical energy systems.
This kind of technology targeting is Beijing’s way of doing things (think “Made in China 2025″). According to Daiwa Capital Markets Hong Kong Ltd., robot density only needs to increase by 13% per year(1) to reach the latter target. Meanwhile, the country’s manufacturing workforce is likely to shrink over the next three years, as it did in 2020. Productivity growth continued to slow, increasing demand for industrial equipment. Overall, the trend points to the ideal balance of supply and demand for automation.
Homegrown companies like Estun Automation and Shenzhen Inovance Technology are building fast, precise machines that can assemble cars, move in 3D, and bend in complex ways — almost like a human hand. Others can weld, turn screws, and make laser marks. Metalworking and auto parts companies are catching up, with sales up 72% in the last quarter of 2022. Japanese companies Fanuc Corp. and Yaskawa Electric Corp. occupied a leading position in the market and satisfied most of the demand.
Meanwhile, the government’s previous drive to automate factories has resulted in China having the world’s largest robot workforce and the highest annual installations. This helps to speed up the production process and improve manufacturing accuracy.
However, installing more robots on manufacturing floors does not mean that China will achieve rapid technological advances and a jump in productivity. While these machines are designed to fill gaps in the workforce, they also require highly skilled people to reap the benefits of smart manufacturing. Without proper qualifications, employees cannot program and operate automation equipment.
Given the speed with which China is adopting this technology, the country’s 300 million migrant workers are unlikely to make a significant contribution to the gross domestic product of manufacturing. As of 2021, only 12.6% have a college degree or higher.
This worries the world’s largest workforce. By the end of this decade, up to 40 percent of the operations performed by hundreds of millions of migrant workers will be automated. With over half of them aged 41 and over, retraining is challenging. Meanwhile, attracting younger, more skilled and educated Chinese will take time — and it won’t happen at the pace of increasing robot density or within the time frame set by the ministry. At the same time, less and less people prefer to be engaged in production, preferring services. These citizens are now less mobile, looking for work closer to home.
To stop further dropouts, government planners have gone to great lengths to encourage workers to return to their jobs after a zero recovery from Covid. A number of subsidies have been announced. After the Lunar New Year, thousands of buses, planes and trains were mobilized to take people to manufacturing centers and construction sites. In the southern city of Dongguan, officials spent nearly $3 million on recruitment. While this could help infrastructure and services, these efforts could be undermined if few people are able to operate complex robots in Chinese factories.
Politicians are turning their attention to training and upskilling the workforce. They also encourage businesses to invest in vocational education. It might help, but Beijing needs to do more to get workers to catch up with the robots. The last thing he wants is a bunch of idle machines.
This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.
Anjani Trivedi is a columnist for Bloomberg Opinion. It covers sectors such as politics and companies in the engineering, automotive, electric vehicle and battery industries in the Asia-Pacific region. Previously, she was a finance and markets columnist and reporter for The Wall Street Journal. Prior to that, she was an investment banker in New York and London.
Post time: Mar-23-2023
