China still gains an advantage in the times of “unmanned factory”

A manufacturing hub in South China's Guangdong province has begun constructing the city's first zero-labor factory, a signal that the local authorities are bringing into effect its "robot assembling line" strategy. Robot factory, the thing that only seems to be seen in sci-fi, now turns into reality, arousing huge curiosity from the public.

As a matter of fact, the figure of these robots is far more different from people’s imagination: Some have mechanical arms of many joints and others are just composed of two vertical pathways. Despite the ordinary appearances, the kind of robots have been widely existing in our daily life, like in the sorting of luggage in the airport, in the spraying process of motor factories, or in the sorting out of express mails of logistic companies.

One of the most obvious advantages of robots is the possibility of reducing labor number on a large scale. Apart from that, robots can also uplift working efficiency and product quality. They can even replace human in dangerous and polluted environment, such as in the spraying processing where the replacement of human beings with robots can avoid people being harmed by chemical coating.

After China’s entry into WTO, due to the large demographic dividend and low labor price, a huge amount of capital has flowed into China. By combining with labor force, China has rapidly expanded its production scale to support the long period of high-speed economic development. Yet with the rapid development of economy, the price of labor force has also arisen. Besides, with many years of law enforcement concerning family planning, the demographic dividend has come to disappear. Lack of labor and expensive costs have become a serious problem haunting enterprises. For example, Dongguan, the city dubbed as “World Factory” has a lack of labor force of over 100,000 people.

Meanwhile, with the price increase of human labor, such developing countries as India, Vietnam and Mexico has attracted FDI to replace China by means of the advantage of low costs of human labor, becoming destination for transferring new technologies. It has become an inevitable problem for China’s economy to face to resolve the lack and difficulties in hiring labor force.

According to economic theory, such factors as capital, land and labor can replace one another to some extent. Therefore, by purchasing equipment, the replacement of human beings with equipment is actually the replacement of labor with capital. What is more, with the development of science and technologies, the efficiency of capital replacing human labor is also increasing. To be more specific, that is the maturity of robot technology and the reduction of robot price. As early as 2006, Forbes magazine had predicted that: When the price of industrial robots reduces to around 20,000 dollars and when their performance tends to be stable and mature, there would appear large scale of waves of bringing in industrial robots to replace human labor in the manufacturing industry.

For one thing, the demographic dividend in China is gradually disappearing. For the other, the maturity of robotic technology has appeared. With the common influence of the two factors, capital will gradually replace parts of labor, inevitably becoming a choice and characteristic of the next stage of economic development in China.

However, there exist differences between capital and labor due to the fact that labor force stays where it is born, so generally speaking, it is hard for human labor to move on a large scale around the globe. Therefore, such is the common case that capital would flow to the places where labor force is cheap in order to get combined with it. This is the basic logic during the past economic development of China. On the other hand, the mobility of capital is quite strong, which means that there would be little difference to the investor whether to construct a robot production line in China or in other countries.

The characteristic poses a problem to China’s economic development, that is: Under the condition of disappearing demographic dividend and of more replacement of human labor with capital, what is China’s unique advantage? This is also a question that needs to be answered by China in the new normal stage.

The answer may be optimistic.

The robot industry can not support the whole production all by itself. Such elements as excellent infrastructure, stable political situation, complete and concentrated industrial chain and congregation, crafted technical staff and engineers, and even labor force of relatively high skill that has been provided by colleges and universities over the years can not be moved. Thus, be it unmanned or not, be it replacement of human labor with capital or not, with 30 years’ of accumulation, China still gains an advantage.

Published in Beijing News | 2015-5-7