China’s industrial automation efforts give hope to struggling industries, but underlying problems persist

·7-min read

At his family’s small rice factory in Hunan, Zhou Di has invested more than 200,000 yuan (US$31,350) over the past three years to arm it with automation, including machines for sorting and packing.

“All rice-processing factories I know of have been automated, at least partially. Although my family is located in a rural farming village and with only four people, we’re no exception,” said Zhou, who harvests 100 acres of rice a year, yielding about 100 tonnes of the grain. “My parents are close to 60 years old, and automation is what will keep our rice factory running instead of closing down in the future.”

The pace of replacing humans with robots in industries across China has been accelerating rapidly in the past couple of years, with observations on the ground suggesting that most industrial robotics and intelligent-manufacturing integrated service companies had at least doubled their annual sales in 2021.

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With the large-scale market applications of automation, China has made breakthroughs across a range of technologies, including navigation and optoelectronics, said Luo Jun, chief executive of the International Robotics and Intelligent Equipment Industry Alliance, a government think tank focused on smart manufacturing.

The price for each rice-colour-sorting machine has fallen … That means more SMEs can afford to upgrade their production lines

Zhou Ying, Hunan Hailian Grain and Oil Technology

“In terms of combining artificial intelligence and industrial automation technology, China has been very close to the leading level,” Luo said, adding that China, as the world’s factory, stands to benefit more than other countries from a broader application of automation.

Zhou Ying, who runs Hunan Hailian Grain and Oil Technology, produces “flexible polishing devices” for rice processing. These devices used to come entirely from overseas.

“Many parts of rice-colour-sorting machines used to need to be imported, but now they are 100 per cent domestic made, and the price is getting cheaper because of growing enthusiasm to replace imported components with domestic parts,” Zhou Ying said. “The price for each rice-colour-sorting machine has fallen from more than 50,000 yuan (US$7,840) in 2018 to about 30,000 yuan now. That means more SMEs can afford to upgrade their production lines.”

The pandemic-led manufacturing export boom, concerns over China’s rapidly ageing society and a desire to save money have all resulted in more industrial workers being replaced with machines.

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Trade tensions with Western countries have also given Chinese authorities further impetus to push for the use of more domestically made components during the process of upgrading automated production lines across the country.

In 2015, China set a goal of making 260,000 industrial robots a year by 2025, but the goal was reached four years early, as 268,694 units were produced in the first three quarters of last year.

According to a report from the International Federation of Robotics last month, China ranked ninth in robot density in 2020 – as measured by the number of robot units per 10,000 employees – up from 25th five years earlier.

Beijing recently unveiled a set of ambitious goals for 2021-25 to enhance automation in manufacturing. The goal is to achieve a minimum annual growth of 20 per cent in robotics sales while developing a group of industrial champions to double the “robot density” in the world’s most populous country.

The new five-year plan cites an “increasingly complicated” global environment and “increasingly intense” competition. The plan lists supply-and-demand imbalances and supply-chain stability as challenges to overcome. It also says China’s robotics industry faces problems that include a lack of technology accumulation, a weak industrial foundation, and insufficient high-end supplies.

By 2025, China wants to build a least 500 smart-manufacturing-model factories to lead the development of smart manufacturing, and to cultivate at least 150 smart-manufacturing-solution providers.

According to the National Bureau of Statistics, China’s total year-on-year output of industrial robot production jumped 49 per cent in the first 11 months of 2021.

As a result, domestic capital is flooding into the market. In the first 11 months of 2021 alone, 316 robotics projects received more than 33.05 billion yuan in combined financing. These projects spanned several industries, including medicine, industrial, warehousing and service.

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Industry insiders and experts in Chinese production say that rapid developments in automation technology is helping alleviate China’s labour shortage caused by ageing.

Luo said the rapid development of automation technologies is crucial for China, as they relieve pressure from a shrinking workforce while helping the country maintain its dominance as a global exporter.

By 2050, China’s industrial robotics density will reach 37 units for every 1,000 people, according to a state-funded study published by the monthly Finance and Trade Economics journal in August.

Such a “robot dividend” would be able to make up for more than half of China’s labour shortage in 2050, the report said. It noted that a robot can replace about 60,000 to 83,000 hours of manual labour per year, and that could equate to about 100 million to 140 million labour hours a year by 2050.

According to the report, China’s working-age population in 2050 will be about 814.86 million people, accounting for 59.7 per cent of China’s total population, compared with 993.57 million and 71.2 per cent in 2018.

The popularity of the robotics market has also exceeded expectations in the past two years. In Dongguan, Guangdong province, more than 3,000 companies invested in automated production lines between 2016 and 2020, according to the official website of Dongguan city.

In 2020, a local food-processing company invested 30 million yuan in automating one of its workshops that produces caramel treats, and by doing so was able to reduce the number of workers there by nearly 70 per cent, the report said.

According to the report, the company once hired as many as 9,000 employees during the peak production season, but that number was cut to less than 5,000 because of automation upgrades.

Because of the impact of the pandemic lockdowns, the entire manufacturing industry has realised that production must be automated

Hu Haifeng, Rokae Robotics

“The entire robotics-enabled automation industry is very hot,” said Hu Haifeng, sales manager at Beijing-based Rokae Robotics. “Because of the impact of the pandemic lockdowns, the entire manufacturing industry has realised that production must be automated. Companies that had adopted a wait-and-see attitude have started rushing to place orders [for industrial robots].”

Hu pointed to his company to illustrate his point, noting that sales reached 130 million yuan in 2020, but last year’s sales may have doubled that.

“We are looking to replace imported mid- to high-end robots in electronics, automobiles and medical manufacturing, and even collaborative robots related to surgery,” he said. “So far, the shortage of imported chips has had little impact on us because we have seen great progress in domestic-made core components.”

Some components, such as “speed reducers” that regulate power transmission, are still “dominated by Japanese brands”, but Chinese brands have carved out a small market share, Hu said.

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Meanwhile, demographers have expressed concerns and offered critical assessments of the idea that automation efforts will solve China’s ageing population problem.

“Automation helps upgrade manufacturing and the supply chain, but it does little to help domestic consumption and the ageing problem,” said Huang Wenzheng, a demographer who has written extensively on China’s birth rate.

“In the long run, a shrinking population is more likely to lead to a relative shrinkage in GDP per capita,” he said. “Trapped in an ageing society, all industries will become sunset industries, and China will gradually lose its advantage in the whole industrial chain.

“The willingness to invest has plummeted; innovation and entrepreneurial vitality have slowed; the pace of technology iteration has slowed; and a lot of infrastructure is at risk of getting old due to a lack of both demand and the financial resources to renew it.”

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