China’s Troubling Robot Revolution

China is now shifting its appetite to robots, a transition that will have significant consequences for China’s economy — and the world’s

Martin Ford writes: Over the last decade, China has become, in the eyes of much of the world, a job-eating monster, consuming entire industries with its seemingly limitless supply of low-wage workers. But the reality is that China is now shifting its appetite to robots, a transition that will have significant consequences for China’s economy — and the world’s.

In 2014, Chinese factories accounted for about a quarter of the global ranks of industrial robots — a 54 percent increase over 2013. According to the International Federation of Robotics, it will have more installed manufacturing robots than any other country by 2017.

Midea, a leading manufacturer of home appliances in the heavily industrialized province of Guangdong, plans to replace 6,000 workers in its residential air-conditioning division, about a fifth of the work force, with automation by the end of the year. Foxconn, which makes consumer electronics for Apple and other companies, plans to automate about 70 percent of factory work within three years, and already has a fully robotic factory in Chengdu.

[Check out Martin Ford’s book “Rise of the Robots: Technology and the Threat of a Jobless Future” at Amazon.com]

Chinese factory jobs may thus be poised to evaporate at an even faster pace than has been the case in the United States and other developed countries. That may make it significantly more difficult for China to address one of its paramount economic challenges: the need to rebalance its economy so that domestic consumption plays a far more significant role than is currently the case.

China’s economic growth has been driven not just by manufacturing exports, but also by fixed investment in things like housing, factories and infrastructure — in fact, in recent years investment has made up nearly half of its gross domestic product. Meanwhile, domestic consumer spending represents only about a third of the economic pie, or roughly half the level in the United States.

This is clearly unsustainable. After all, there eventually has to be a return on all those investments. Factories have to produce goods that are profitably sold. Homes have to be occupied, and rent has to be paid. Generating those returns will require Chinese households to step up and play a larger role: They will have to spend far more, not just on the goods produced in China’s factories, but increasingly in the service sector.

[Read the full text here, at NYTimes.com]

Making that happen will be an extraordinary challenge. Indeed, the Chinese leadership has been talking about it for years, but virtually no progress has been made. One problem is that even in the wake of recent wage increases, average Chinese households simply have too little income relative to the size of the economy. Read the rest of this entry »