China Is Replacing Its Workers With Robots

China factory

Photo: AP images

Credit Suisse is out with a massive report on the growth of industrial automation. Yesterday we highlighted their favourite seven stocks in the sector.The most interesting part of the report points out that China appears to be nearing an inflection point that we’ve already seen in Japan and Korea called the ‘Lewis Turning Point’.

Those countries once relied on cheap rural labour to fuel their economies, then reached a point where it dried up, and began to automate.    

China’s manual labour force is rapidly declining as the population ages and more people go to school. That trend, and government programs, are pushing up wages. In order to remain competitive, the country is going to have to invest an incredible amount in modernizing its industries.

The size of China, and the fact that it is only now beginning to ramp up its transformation means that there is enormous room for growth. 

The great infrastructure boom in China might be slowing, but the automation boom is just starting.  

China's supply of cheap manual labour will continue to plummet

There has been massive wage inflation, even through the global recession and Chinese slowdown

The one child policy has lead to a huge demographic shift in the country, further reducing the labour supply

The Chinese people are becoming increasingly educated, and will be looking for higher paid higher skilled jobs

The way that North America maintained output growth has been through increased automation

Now China is joining that trend, in a big way

Using Japan in the 70s and 80s as an example, China appears to be beginning a period of accelerating automation investment

China's robot density is a tiny fraction of Japan's, highlighting the room for growth

Data from Japan, Taiwan, and Korea show rapid growth in the sector in the years after they reached China's current density

If China follows an S-curve for automation similar to Japan, the growth in coming years will be enormous

Robot shipments to Korea rose rapidly with the share of children that were enrolled in school

Credit Suisse expects China to follow a similar path

There's enormous room for growth beyond China as well, throughout the world

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