Chinese Robots Are The Future

Chinese Robots Are The Future
tmeier1964 / Pixabay

As the demand for manufacturing automation is growing, it is China that primarily drives demand. With just under 15% of global GDP credited towards China, the Asian nation accounts for more than double that amount of demand for automation technology. Nearly 1/3 of all manufacturing automation demand is expected to come from China, which is expected to have a 21% compounded annual robotic growth rate, an HSBC report points out. In North America, the growth rate is expected to trail at 7%.

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Manufacturing automation concerns in the US, "few jobs entirely automatable."

In the US, the primary concern is how automation is going to take away jobs.

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In 2013, a widely noted report by Oxford professors Carl Frey and Michael Osborne predicted that 47% of the US workforce, or nearly 69 million jobs, would be automated out of existence. More recent estimates from the McKinsey Global Institute have put the automation job loss numbers at 75 million US jobs with worse case forecasts claiming as much as 65% of all jobs could be lost to automation.

The McKinsey study, however, noted that few jobs will be entirely automatable. In other words, integration with technology was a key criterion for the future, a task which largely requires job trading:

Businesses will be on the front lines of the workplace as it changes. This will require them to both retool their business processes and reevaluate their talent strategies and workforce needs, carefully considering which individuals are needed, which can be redeployed to other jobs, and where new talent may be required. Many companies are finding it is in their self-interest—as well as part of their societal responsibility—to train and prepare workers for a new world of work.

Where is this automation philosophy being most commonly accepted? Not in the US or Europe, but rather China is leading the world.

Manufacturing Automation

China is " Manufacturing automation nation," no longer the low-cost labor provider

Calling China the “automation nation,” HSBC researchers Helen Fang, Michael Hagmann, Richard Schramm and Anderson Chow note that demand for robots is “going into overdrive.”

Around the globe, there is an average of 69 robots per 10,000 workers. By 2020 there are projected to be 150 robots per 10,000 workers, nearly tripling the current standard and displaying almost a 3x growth rate. Nearly 1/3 of all robotic demand is coming from China.

As the Chinese workforce begins to age and expects higher wages, they are no longer the low-cost producer in the region. With the assistance of government policy, an embrace of automation is driving interest in corporations such as Apple to set up shop in the area. CEO Tim Cook told a Fortune Magazine summit that he likes the integration of a “craftsman sort of skill” with advanced robotics, where a focus on tooling management is unique. “It is very rare to find the intersection of manufacturing skills with sophisticated robots,” he said. “The number one attraction is the quality of the people.”

China is offering a “potent mix” to manufacturers using for automation, but the automation road is tricky to navigate. “But while demand for industrial robots is still rising sharply in China, the nature of the market is changing,” the HSBC report noted. “It’s becoming deeper and broader as new industries follow the automation trend.”

HSBC points to Chinese automotive concerns being the primary buyers of industrial robots, but the automation trend is spreading to electronics, semiconductors, smart factories, logistics, household appliances and electric vehicles. With breakeven rates expected to reach less than one year in 2019, manufacturing automation is a trend that could see quicker adoption.

Where do most of these robots come from? Largely Japan, at present. From 2015 to 2016, 70% of imported industrial robots came from Japan, with only 8% coming from domestic Chinese producers. 35% came from other global suppliers. In this regard, HSBC likes Japanese automation provider FANUC as one of their top investment picks.

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)
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