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| Arthur Kroeber |
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| Ben Cavender |
As China's economy expanded at breakneck speed, so has pay for employees. But the wage increase has translated to higher costs for companies with assembly lines in China. Some firms are now taking their business elsewhere, which also means China could start losing jobs to other developing countries like Sri Lanka, where hourly factory wages are $0.50.
Apparel manufacturing has been hit "extremely hard," said Ben Cavender, a principal at Shanghai-based China Market Research. "The result has been that factory owners have gone on a massive investment spree outside of China."...
With fewer jobs available — and perhaps more robots buzzing on factory floors — experts maintain unemployment will be an ongoing concern, especially as the government works to maneuver the world's second-largest economy away from manufacturing and toward services.
"You're talking about a way to re-skill millions of workers, but it's not clear what jobs they're going to be placed into," Cavender said. "They're creating white collar, clerical jobs here as quickly as possible, but it's still not enough to go around."More in CNBC.
Fashion has been changing massively, as low-cost manufacturing moved from China to other countries, and the fashion brand focus on value, more than on cheap production, tells Shanghai-based retail expert Ben Cavender in Just-Style. And the transition process in fashion brands will continue to cause pain, as robots move in.
Last year, China's government launched its 'Made in China 2025' programme, aimed at advancing restructuring of the manufacturing sector, upgrading China from a manufacturer of quantity to one of quality, and investing in high-tech sectors and projects like advanced robotics.
"One thing China is good at doing is making plans for the future," Cavender says. "The whole point of the 2025 programme is 'how do we become the Industry 4.0 leader?' What we're seeing now is massive investment in Chinese start-up companies that are trying to build more efficient robots, building smart factories, looking at big data and analytics, and using it in ways that are effective in the workplace. A Chinese company is right now trying to buy the largest robotics manufacturer in Germany."
But for all this investment and development, Cavender points out that "tens of thousands" of Chinese manufacturers will go out of business due to the inefficiency of their factories. They are also only just starting to fully realise the value of protecting their intellectual property (IP).
He adds: "Chinese companies know they need to spend on research and development, and they are spending but still at a relatively low level. The apparel sector [spend] is still less than 1% of revenue. They are also not terribly efficient with how they use their findings. They don't know how to work their supply chain or processes very well.
"They know there is this need for responsive, faster design, but the reality is nobody knows how to collect data and use it properly. So there is still an opportunity here that if you can do that well and take the time to find the partners that know how to do that, you've already got a leg up on the competition."
The key to companies capitalising on these weaknesses over the next 15 years, Cavender says, is to be flexible, and invest now.
"If you're not trying things with automation and robotics now then it's going to be too late. You have to be willing to change and try new things. The biggest reason why the Chinese apparel industry stays healthy is that they're willing to try new things, they're always experimenting."
He also points to the importance of analysing data from customers, and subsequently building an identity of the customer and knowing what they want. "It's not really truly about technology at the end of the day, it's about teamwork, working together and finding ways to avoid brain drain. You need to find a way to keep those people and get the best out of them.More in Just-Style.
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| Shaun Rein |
In the 1990s, service accounted for 50 percent of China’s economy. It now accounts for 68 percent. Chinese workers are now a third as productive as their counterparts in America or Germany. My firm, the China Market Research Group, estimates that it’s now only about 20 percent cheaper to manufacture in China than in the U.S. Some Chinese companies, like the construction manufacturer SANY, are even setting up manufacturing operations in the United States.
This is why manufacturers have turned their focus to automation (see “The People’s Robots,” page 44), which is one of the fastest-growing sectors in the country, with a growth rate of 59 percent last year. China is now the world’s largest user of industrial robots.
Foxconn, the maker of iPhones and other gadgets, operates factory-cities that employ upward of 350,000 people, but it is replacing people with robots because it can no longer find the workers it needs. It’s now easier and cheaper for Foxconn to automate than it is to train workers. After 2010, when 14 Foxconn workers committed suicide, the company started an initiative to use robots in its factories’ “3D” positions—dirty, dangerous, and dull. It hopes to reach 30 percent automation by 2020 by installing more than a million robots on its production lines.
Chinese real estate developer Vanke has invested $20 million to establish a robotics R&D center to reduce its reliance on human labor. Hyundai and its partner Beijing Motors recently completed a factory that will produce over a million cars a year, mostly using robotic assembly. Even restaurants in Shanghai are using robots to make udon noodles because they can’t find enough cooks.
China won’t lose its manufacturing dominance anytime soon. It has advantages in scale and logistical capabilities. But it will become the leading hub for innovation in manufacturing by adopting and creating robotics faster than any other nation.More in MIT Technology Review.
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| Sara Hsu |
The government is attempting to increase the number of robots per 10,000 people from about 36 toward developed-country levels, at about 164 robots per 10,000 people in the U.S., and higher in the case of Germany or Japan. The goal is to expand the use and creation of innovation to become a high-tech hub by 2049.
This does not have pleasant implications for China’s labor market. The government has stressed that increasing consumption is an important component of the new economy, but without jobs many lower-income individuals well be unable to purchase retail products.
Furthermore, as the leadership has stressed that China is moving up its value chain, as it sheds low-skilled jobs, inevitably a large body of the workforce will find themselves left out of the economic growth story. This does not make sense for an economy whose comparative advantage is in labor-intensive production.
Already, China has a problem employing many of its college graduates. There is insufficient job creation in high-skilled manufacturing and the service sector The unemployment rate is even higher for college graduates, who are supposedly high-skilled, than for high school graduates. Those who have a college degree find themselves ill-suited for the labor market, with specializations that do not match most job descriptions.
An increasing number of companies are planning to move to automated production processes. The switch to robotic labor in manufacturing will only serve to increase unemployment in an economy that is moving out of low-skilled manufacturing and into limbo. Opening up the services sectors such as health and education could be promising, but this is happening at a glacial pace as China’s leadership strives to combat a massive economic slowdown and mounting debt. Until then, workers will continue to feel the pinch as their livelihoods are encroached upon at both ends.More in the Diplomat.
