Must-read discussion of China's push for industrial automation with Prof. Sun Zhongwei.
A few highlights:
- China's push for automation was due to labor shortage, not the cause of it. Workers don't want factory jobs, prefer pay and conditions at service jobs. Factories were struggling to find more workers. Around 2014-15 many factories across China began process of automation. No mass layoffs. Instead factory jobs went away through natural attrition.
- Push for automation was partly driven by central government policy, such as Made in China 2025, followed by parallel local government programs.
- Rising labor costs are the main reason why countries start to deindustrialize. But China has resisted the trend toward deindustrialization by pushing automation. This decoupled factory production from the limited pool of factory workers and rising wage costs.
- Lower end industries did relocate from China to Southeast Asia. However Southeast Asian countries are not able to automate as much: fewer automation technicians, lack of upstream and downstream industry integration. U.S. faces similar problems with reshoring manufacturing.
- AI is causing some jobs to disappear. But those workers are often moved to different jobs in the same firm. (My note: this was found to happen in US companies facing the "China shock.")
- Migrant workers also often return home after their jobs are automated. There are more industries in rural areas than before, providing more job opportunities in their hometowns. This includes hard-to-automate industries like textiles.
- Automation can be a multi-stage process in a factory. First, a single robot replaces several workers. Then integrate production line into an automated process flow. Add "smart" capabilities like being able to adapt to changes in production or schedule production on its own.
- "Little to lose" paper: found that in China people were less anxious about job loss due to automation than in other countries like the US. Migrant workers least anxious because they're used to job insecurity and frequent job changes. Local workers have more to lose and are more worried.
- Chinese central and local governments normally concerned about job loss. So why push automation? Because in the end, it's believed that China's overall job growth and economic growth rely on China's ability to upgrade tech and industry.
- Go to Dongguan. Factories from Taiwan or Japan planted the seeds of knowledge and human capital, training Chinese workers who later built their own competitors that became industry giants.
- Pearl River Delta (around Shenzhen) had factories earlier, but low-value, high-labor like textiles. Yangtze River Delta (around Shanghai) had factories later, but higher-value, larger, more capital-intensive. PRD factories were for a long time much smaller scale vs larger factories in YRD with centralized worker dorms.
Read full interview HERE.