China is rapidly replacing factory workers with machines and will likely have the highest number of industrial robots in the world by next year, according to a new World Bank report.
The fast pace of automation in China is not only threatening local low-skilled workers, but could affect opportunities for export-led development in other countries, too.
The Washington-based development bank said in the report titled “Trouble in the Making? The Future of Manufacturing-Led Development” that advanced robotics, 3D printing and smart automation are new factors influencing which locations are attractive for production.
Poorer countries risk losing their main advantage in attracting manufacturing business – cheap labour – if companies find it cheaper to build automated factories closer to consumers in countries such as the United States, Germany, Japan and – China.
“The use of new technologies to produce traditional manufactured goods will be disruptive in developing economies – whether they are using the new technologies or not,” said Mary Hallward-Driemeier, Senior Economic Advisor with the World Bank Group’s Trade & Competitiveness Global Practice and lead author of the report.
More than half of all manufactured goods in the world were produced in high-income countries last year, while China, the single largest producer, accounted for a quarter.
China itself has successfully used its abundant labour force to become an export powerhouse and the world’s second biggest economy, helping to lift hundreds of millions of people out of poverty in just a couple of decades.
But the country now stands out as a middle-income country that is rapidly automating production through robotisation to address its declining wage competitiveness, the World Bank said.
China is projected to have more than 400,000 industrial robots in operational stock in the manufacturing sector by 2018, more than any other country in the world, according to the report. This would account for more than a third of all robots expected to be installed globally.
Operational stock of industrial robots by country – World Bank chart. World Bank
China’s robot revolution
China’s density of robots is currently below the world average and well behind world leaders like South Korea, Singapore and Japan, but it is quickly catching up under the “robot revolution” proposed by President Xi Jinping in 2014.
The government’s ‘Made in China 2025’ plan aims to upgrade Chinese factories into highly-advanced and innovative centres capable of producing high-tech products such as robots, energy-saving vehicles, aeroplanes and more.
Last year, shipments of robots to China increased by 27 percent to about 90,000 units – almost a third of the global total.
Apple and Samsung subcontractor Foxconn said last year it had replaced 60,000 Chinese workers with robots, while Changying Precision Technology Company, which makes mobile phones, announced earlier this year that its “unmanned factory”, almost entirely run by robots, has boosted productivity by 250 percent.
In its report, the World Bank cited a study from last year which said that nearly half of manufacturers in the important Pearl River Delta region would consider automation or streamlining processes as a response to labour shortages; less than a third would consider moving capacity either inland or out of China.
The World Bank said the reshoring of production by developed countries, thanks to robots, could affect current manufacturing exporters and potentially stifle the entry of newcomers. But China’s case could be even more important because it continues to remain a big player in labour-intensive sectors as well.
“If China moves into more sophisticated exports while automating and retaining market share of the less sophisticated exports, then the expected en masse migration of manufacturing jobs [to poorer countries such as those in Sub-Saharan Africa] may not occur,” the report read.
Not all doom and gloom for the developing world
However, the World Bank stressed that the rise of robots was not all bad news for developing countries.
Several emerging markets, including Brazil, Indonesia and Malaysia, also have notable stocks of industrial robots, while many multinational companies are locating ICT-heavy work in countries like India due to the availability of technical and engineering talent and the lure of paying competitive wages.
The World Bank said the production of tradeable goods such as textiles, garments and footwear continues to be labour-intensive and does not yet feature much automation, citing Ethiopia as an emerging production hub.
Meanwhile, commodity-based manufacturing, such as food processing, wood and paper products, and basic metals will also remain an entry point for less-industrialised countries.
Nevertheless, the World Bank urged countries to invest in education and training, infrastructure and policies that will help generate new types of business.
“Technology and globalisation are changing how manufacturing contributes to development. We will need to embrace this change rather than fear it,” said Anabel Gonzalez, the World Bank Group’s Senior Director for Trade & Competitiveness.
