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China and the WTO
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CHINA: "Chinese Economic Performance in the Long Run"

CHINA: "Chinese Economic Performance in the Long Run". 66-page transcript from the Brookings Institution.

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backCHINAtalk June, 2012

Robots lift China's factories to new heights

Baoding, China: The giant orange robotic arms that swiftly weld together car frames at the Great Wall Motors factory in Baoding might seem like the perfect answer to China's fast-rising labour costs - they don't ask for a raise, get injured or go on strike.

For Great Wall , a private sector Chinese car maker that employs 50,000 workers, the Swiss robots and other machinery that line its bright factory floor produce more than cost savings. The company hopes they will help it build cars good enough to compete with the global auto makers.

"You don't have to be an expert see the (quality) gap between Chinese cars and those made by companies like Audi and Volkswagen," said Li Shaohui, who oversees automatic control engineering for the company. " To beat those competitors we have no choice but to use a higher level of equipment and technology."

From car plants to microchip foundries, China's industrial sector increasingly runs by machine.

According to Nomura, 28 percent of factory machines in China use numerical controls - one measure of automation. That may be far lower than Japan's 83 percent, but China is growing far faster than Japan did at a comparable stage of development, says Ge Wenjie, a machinery analyst with Nomura.

One of the biggest could be Foxconn Technology Group, maker of products for tech giant Apple, which is talking of plans to put a million robots in its factories.

The army of cheap labourers that made China a manufacturing powerhouse is neither as vast as once thought nor as cheap as it was. In response, manufacturers have been spending heavily on machines that will both make them more productive and let them churn out higher quality goods.

That change will pose a growing challenge for U.S., European and Japanese industrial companies not used to competing with Chinese firms in the high-end segments of their markets.

In other words, China may soon be known less for cheap Christmas toys and more for high-end medical equipment, luxury cars and jet engines.

"You will see foreign players facing more and more pressure from leading local manufacturers upgrading their products, their quality and their scale," said Raymond Tsang, a China-based partner with consultancy Bain.

Great Wall has seen some early success with it own efforts to take on the global brands. The company's solidly built Haval SUV and cheerfully named Wingle pickup truck have gained a foothold in Australia, where they sell for about half the price of comparable Japanese models.

Four of its models became the first Chinese cars to pass Europe's safety and emissions requirements, though they aren't yet on sale there.

THE COST OF A ROBOT

Automation doesn't come cheap. A factory floor robot of the kind in Great Wall's plant costs about 4 million Japanese yen ($50,760) according to Ge of Nomura, and a production line might easily have 100 of them. There is also the cost of downtime, when machines need to be maintained or adjusted to handle new products.

For years, low wages meant automation was simply not worth the expense. A company didn't need to buy a packaging machine when it was cheaper to hire a room full of workers to do the same thing.

But steady cost rises are tilting the balance in favour of machines. Last year, urban labour costs in China increased 12.3 percent in inflation-adjusted terms for private companies, which face a worsening labour shortage.

Source: Economic Times - GAI

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