Send in the ‘Bots

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young china robot

China is facing a serious labor shortage in the not-too-distant future, particularly when it comes to filling dirty, dangerous jobs. Chinese citizens born during the 1990s are better educated than any previous generation, and as a result, factory equipment operator jobs are going unfilled while clerical positions are in high demand. China’s population is also aging – the ratio of people 65 or older to those between 15 and 64 has grown from 10 percent a decade ago to 13 percent in 2014. Slowing birth rates since the 1990s mean that the proportion of retirees is going to keep growing. What to do? Send in the robots, of course. When the old-age dependency ratio reached China’s current level in Japan (the 1980s) and South Korea (2010), automation took off, and Credit Suisse expects it will do so in China as well. Demographics aside, there are numerous other reasons for the increased amount of automation in Chinese manufacturing. Wages are rising quickly, giving factory owners a reason to prefer non-human workers. The combination of rapid urbanization and rising incomes in Chinese society has also shortened the life cycle for manufactured goods and diversified the array of goods consumers want. Both trends put pressure on factory owners to be highly flexible, produce in smaller batches, and yet ensure consistent quality. Robots are good for all of the above. Credit Suisse estimates that Chinese demand for industrial robots will increase 35 percent a year through 2020. While multinational corporations currently supply China with most of its robots, their market share declined from 75 percent in 2009 to 67 percent in 2014 as the Chinese government invested heavily in smart manufacturing. Credit Suisse expects domestic industrial robot makers to continue taking market share from foreign competitors over the coming years.

 

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