Research conducted by SIEPR’s Gopi Shah Goda shows that the structure of retirement plans play an important role in determining who saves more or less money.
Rising labor costs, an aging population and government policies are reshaping Chinese manufacturing. Hongbin Li is on a singular mission to understand how that’s happening.
Li, a SIEPR senior fellow and director of the China Program at the Stanford King Center on Global Development, helped create the China Employer-Employee Survey (CEES), a tool that lets researchers analyze the differences between the productivity and profitability of state-owned manufacturers versus private ones.
Now, in a newly published study in the Journal of Economic Perspectives, Li and a team of scholars draw on CEES data to show fresh insights into China’s aggressive push into automation—specifically, the increasing use of robots—to maintain its status as the “world’s factory.”
China now owns nearly one-fifth of the global supply of robots — making it the world’s largest user of industrial robots, ahead of Japan, the United States, South Korea, and Germany, according to data cited in Li’s research. This is a dramatic turnaround from the early 2000s, when China bought less than one percent of robots sold worldwide each year.
“Most people have this image that workers are cheap in China and robots are expensive,” he says. “But China’s wages have been increasing really fast and the size of the labor force is declining. The growing use of robots is both a market and a government response to this.”
Li says that China is making a long-term bet that, as robots become cheaper and perform better, it can stay competitive as some manufacturing migrates to lower labor-cost countries like India and Vietnam.
Since 2013, the Chinese government has taken various steps to promote the use of robots and other technology in business. Little, however, has been known about how robots are being deployed from one manufacturer to the next and how they are impacting workers.
Li’s analysis, “The Rise of Robots in China,” offers an unprecedented look at what’s happening at the factory level. In 2016, Li and his collaborators conducted a CEES survey of nearly 8,850 workers at 1,115 manufacturers in China’s two dominant manufacturing regions. When it comes to industrial robotics, they found that:
Li and his collaborators on the robot research — Hong Cheng and Dandan Li of China’s Wuhan University and Ruixue Jia of the University of California San Diego — say more research is needed to better understand what is behind these and other trends identified in their paper. But they have some ideas about what those drivers might be.
State-owned companies, for example, may be slower to deploy robots because they are less susceptible to market forces, which Li and his team identified as a major reason why Chinese manufacturers are relying on them more.
Li and his colleagues also provided a number of possible hypotheses for their most surprising finding: worker complacency. In other parts of the world, investments in robotics—and automation generally—are raising fears about the future of work.
In the Chinese media, instead of stealing jobs, robots are portrayed as a viable solution to the country’s labor market challenges and a necessary response to a painful past.
“There is a perception that China endured numerous foreign invasions starting in the 19th century because of its technological inferiority,” Li says. “Robotics is believed to be essential for China’s rise as a world power.”
According to Li and his co-authors, another explanation could be that China’s relatively weak labor unions don’t have the capacity to galvanize worker opposition.
Li adds that worker attitude may change, especially if China’s economy falters. He plans to explore this and questions raised by China’s robotics strategy in further detail in future research.
As of now, he expects China’s bet on robotics will dispel speculation that the country’s days as the “world’s factory” are numbered.
“China has a big consumer market,” Li says. “If the cost of robot technology becomes low and labor costs aren’t a problem anymore, I suspect the country’s manufacturing industry will remain strong”.
Krysten Crawford is a freelance writer.