Chinese Economics Thread

[PanAsian]

Well if Chinese officials are having meetings in Vegas, they should be shot. The bugging of the Chinese Air Force One should tell any official doing so they should be executed just for stupidity alone.

I meant that as a joke though if it actually happens then you already spelled out the logical conclusion. Unless it's a conference on how to develop a Chinese gambling tourism mecca in the middle of the desert!

 

[AssassinsMace]

I meant that as a joke though if it actually happens then you already spelled out the logical conclusion. Unless it's a conference on how to develop a Chinese gambling tourism mecca in the middle of the desert!

Given they allowed through trust to an American company to refurbish the plane to be then bugged, it probably wouldn't be too off the mark.

 

[broadsword]

Manufacturing hub starts work on first zero-labor factory
2015-05-03

​

Robot arms weld car parts at an auto plant of Dongfeng Peugeot Citroen Automobile Co in Wuhan city, central China's Hubei province, Sept 24, 2014.[Photo/IC]

A manufacturing hub in South China's Guangdong province has begun constructing the city's first zero-labor factory, a signal that the local authorities are bringing into effect its "robot assembling line" strategy.

Dongguan-based private company Everwin Precision Technology Ltd is pushing toward putting 1,000 robots in use in its first phase of the zero-labor project, China National Radio reported. It said the company has already put first 100 robots on the assembly line.
"The 'zero-labor factory' does not mean we will not employ any humans, but what it means is that we will scale down the size of workers by up to 90 percent," said Chen Qixing, the company's board chairman.

After the work on smart factory started, Chen predicted that instead of 2,000 workers, the current strength of the workforce, the company will require only 200 to operate software system and backstage management.

Under the current pressure of labor shortage, calls to use smart robots in cities around the Pearl River Delta (PRD), including Foshan and Dongguan, are becoming louder.
"It is necessary to replace human workers with robots, given the severe labor shortage and mounting labor costs," said Di Suoling, head of Dongguan-based Taiwan Business Association.

Manufacturers in the PRD have been hit by a shortage of an estimated 600,000 to 800,000 workers, according to data released after the Spring Festival in February.
Tens of thousands of migrant workers had earlier gone back home to inlands for a family get-together and some of them decided to settle down in their hometown where the living costs are much less than the coastal cities.

The country also faces the problem of an increasing number of aging migrant workers.
Although the number of migrant workers in China continued to grow in 2014, the rate of increase for the group has fallen consecutively for four years, and their average age is on the rise, according to a report released by the National Bureau of Statistics.

The year-on-year growth rate has been declining since 2010. From 2010 to 2013, the figure stood at 5.4 percent, 4.4 percent, 3.9 percent and 2.4 percent, respectively.

Around 43.5 percent of migrants in 2014 were over 40 years old, compared to 34.1 percent in 2010, and 30 percent in 2008, government data show.

"In the future, the percentage of migrant workers under 40 will further decrease, and this is a warning for China's labor-intensive manufacturing industry," said Li Zuojun, a senior researcher at the Development Research Center of the State Council, according to Economic Daily.

Faced with the dire situation of a shrinking workforce, economists suggest that China should upgrade its technology and largely use smart robots.
Guangdong authorities said in March that they will invest 943 billion yuan ($152 billion) to replace humans with robots within three years.

The local government will push for application of robots in 1,950 companies across the province and plans to build two advanced industrial bases for robot production by the end of 2017.

 

[Ultra]

Manufacturing hub starts work on first zero-labor factory
2015-05-03

​

Robot arms weld car parts at an auto plant of Dongfeng Peugeot Citroen Automobile Co in Wuhan city, central China's Hubei province, Sept 24, 2014.[Photo/IC]

A manufacturing hub in South China's Guangdong province has begun constructing the city's first zero-labor factory, a signal that the local authorities are bringing into effect its "robot assembling line" strategy.

Dongguan-based private company Everwin Precision Technology Ltd is pushing toward putting 1,000 robots in use in its first phase of the zero-labor project, China National Radio reported. It said the company has already put first 100 robots on the assembly line.
"The 'zero-labor factory' does not mean we will not employ any humans, but what it means is that we will scale down the size of workers by up to 90 percent," said Chen Qixing, the company's board chairman.

After the work on smart factory started, Chen predicted that instead of 2,000 workers, the current strength of the workforce, the company will require only 200 to operate software system and backstage management.

Under the current pressure of labor shortage, calls to use smart robots in cities around the Pearl River Delta (PRD), including Foshan and Dongguan, are becoming louder.
"It is necessary to replace human workers with robots, given the severe labor shortage and mounting labor costs," said Di Suoling, head of Dongguan-based Taiwan Business Association.

Manufacturers in the PRD have been hit by a shortage of an estimated 600,000 to 800,000 workers, according to data released after the Spring Festival in February.
Tens of thousands of migrant workers had earlier gone back home to inlands for a family get-together and some of them decided to settle down in their hometown where the living costs are much less than the coastal cities.

The country also faces the problem of an increasing number of aging migrant workers.
Although the number of migrant workers in China continued to grow in 2014, the rate of increase for the group has fallen consecutively for four years, and their average age is on the rise, according to a report released by the National Bureau of Statistics.

The year-on-year growth rate has been declining since 2010. From 2010 to 2013, the figure stood at 5.4 percent, 4.4 percent, 3.9 percent and 2.4 percent, respectively.

Around 43.5 percent of migrants in 2014 were over 40 years old, compared to 34.1 percent in 2010, and 30 percent in 2008, government data show.

"In the future, the percentage of migrant workers under 40 will further decrease, and this is a warning for China's labor-intensive manufacturing industry," said Li Zuojun, a senior researcher at the Development Research Center of the State Council, according to Economic Daily.

Faced with the dire situation of a shrinking workforce, economists suggest that China should upgrade its technology and largely use smart robots.
Guangdong authorities said in March that they will invest 943 billion yuan ($152 billion) to replace humans with robots within three years.

The local government will push for application of robots in 1,950 companies across the province and plans to build two advanced industrial bases for robot production by the end of 2017.

Wow, that is worrying, I didn't know the problem is this severe. 43.5% of the migrant workforce is over 40, that means in a little more than 15 years most of them will not be able to work or will be looking at retiring. That will be a massive downward pressure on the economy like nothing the world has seen - enormous medical bills (and could be further exasperated by the shortage doctors and medical staff as there are far less newer generation than the older generation plus shortage of trained medical staff, and the deteriorating environment which cause health problem on the population) will be the biggest problem which is also faced by advanced countries like US and Japan, Australia, etc where government are trying to kick people off the healthcare benefits as it is putting enormous dent on the budget.

I think for China this is a crisis in the making, as there will be a lot of aging people with no where to turn to as they can't afford medical treatments (being low wage earners / labourers) which puts enormous pressure on their offsprings and next generation - social order could break down when these desperate people do desperate things just so they can alleviate the pain. China needs an urgent comprehensive policy to deal with this timebomb in my opinion. Things like enlarging the intakes for the medical schools, encouraging more kids to go into medical professions.... etc.

Either that or when the problem really hits the fan 15 years down the track they will be forced to import third world country doctors and nurses like US and Australia are doing right now - lowering immigration and VISA requirements. But I think even if China follow the US and Australian policy of lowering requirement to encouraging more medical staff to come to their country, I am pretty certain they will be met with failure - reason being Chinese is incredibly hard language to learn and master - and in medical profession where communication is critical this will only mean they won't be able to find qualified medical staff to work in China. Secondly the deteriorating environment is unattractive for anyone to want to migrate to China. This means they won't be able to rely on third world country medical staff to help China like the first world countries does right now. They certainly won't be able to look to the Indians for doctors and nurses that's for sure (as ALL of them only being educated in English)!

 

[PanAsian]

Wow, that is worrying, I didn't know the problem is this severe. 43.5% of the migrant workforce is over 40, that means in a little more than 15 years most of them will not be able to work or will be looking at retiring. That will be a massive downward pressure on the economy like nothing the world has seen - enormous medical bills (and could be further exasperated by the shortage doctors and medical staff as there are far less newer generation than the older generation plus shortage of trained medical staff, and the deteriorating environment which cause health problem on the population) will be the biggest problem which is also faced by advanced countries like US and Japan, Australia, etc where government are trying to kick people off the healthcare benefits as it is putting enormous dent on the budget.

I think for China this is a crisis in the making, as there will be a lot of aging people with no where to turn to as they can't afford medical treatments (being low wage earners / labourers) which puts enormous pressure on their offsprings and next generation - social order could break down when these desperate people do desperate things just so they can alleviate the pain. China needs an urgent comprehensive policy to deal with this timebomb in my opinion. Things like enlarging the intakes for the medical schools, encouraging more kids to go into medical professions.... etc.

Either that or when the problem really hits the fan 15 years down the track they will be forced to import third world country doctors and nurses like US and Australia are doing right now - lowering immigration and VISA requirements. But I think even if China follow the US and Australian policy of lowering requirement to encouraging more medical staff to come to their country, I am pretty certain they will be met with failure - reason being Chinese is incredibly hard language to learn and master - and in medical profession where communication is critical this will only mean they won't be able to find qualified medical staff to work in China. Secondly the deteriorating environment is unattractive for anyone to want to migrate to China. This means they won't be able to rely on third world country medical staff to help China like the first world countries does right now. They certainly won't be able to look to the Indians for doctors and nurses that's for sure (as ALL of them only being educated in English)!

That's why I think it's a huge mistake for China to not have abolished the one child policy 5 to 10 years ago. Or even now, for that matter.

 

[Hytenxic]

Interesting piece and a few good points countering the hype of the AIIB these few days.

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[Blackstone]

That's why I think it's a huge mistake for China to not have abolished the one child policy 5 to 10 years ago. Or even now, for that matter.

Abolishing one-child policy might have made some difference ten years ago, but given China's economic development and the fact Chinese women have relatively unhampered access to it too, fewer babies over time is just a byproduct of more DINKS (double income, no kids) in Chinese society.

 

[PanAsian]

Abolishing one-child policy might have made some difference ten years ago, but given China's economic development and the fact Chinese women have relatively unhampered access to it too, fewer babies over time is just a byproduct of more DINKS (double income, no kids) in Chinese society.

Which is exactly why the one child policy is both redundant (in the case of "DINK"s) and exacerbating the problem (preventing others who want to have more kids from doing so).

 

[solarz]

Wow, that is worrying, I didn't know the problem is this severe. 43.5% of the migrant workforce is over 40, that means in a little more than 15 years most of them will not be able to work or will be looking at retiring. That will be a massive downward pressure on the economy like nothing the world has seen - enormous medical bills (and could be further exasperated by the shortage doctors and medical staff as there are far less newer generation than the older generation plus shortage of trained medical staff, and the deteriorating environment which cause health problem on the population) will be the biggest problem which is also faced by advanced countries like US and Japan, Australia, etc where government are trying to kick people off the healthcare benefits as it is putting enormous dent on the budget.

There are several problems with that analysis.

First, China's construction/infrastructure boom is ending. The HSR is done, many new urban centers are awaiting inhabitants (aka the "Ghost Cities"). Therefore, the demand for construction workers will drastically drop in the next decade.

Second, average wage is rising, along with standards of living. A single migrant worker probably earns twice as much today, even taking into account inflation, than a similar worker might have earned 15 years ago. Further, there are many more better job opportunities as China's economy expands its service sector. As the middle class becomes more prosperous, they become able to hire nannies, go to spas and restaurants more often, etc. All of those services are overwhelmingly staffed by migrant workers. What's more, those jobs are staffed by *female* workers. Rural residents have been allowed for over a decade now to have a second child if the first was a girl. That means if we take into account the *female* work force, then there would be no noticeable labor shortage.

Third, let's face it, migrant workers do not live as long as middle-class people. Ubiquitous smoking, drinking, and pollution means their average life expectancy is probably around 60. It's might not be a pretty thing to say, but I don't think China will face quite the same kind of population pressures as Japan.

I certainly do not dispute that China will be facing some population pressure, but I don't think it will necessarily be more dramatic than what we are seeing right now.

 

[Ultra]

There are several problems with that analysis.

First, China's construction/infrastructure boom is ending. The HSR is done, many new urban centers are awaiting inhabitants (aka the "Ghost Cities"). Therefore, the demand for construction workers will drastically drop in the next decade.

Not too sure what point you are infering to - if you meant labour are disappearing as
construction/infrastructure boom is ending - I think you are under-estimating chinese appetite for property investment. It is almost ingrained in the Chinese culture to invest - and as China go from the old agarian culture where saving and putting money in the bank is the "right way of investment" to the modern property investment (and even stock market), the demand for property will continue. Not to mention China still plan to build another 8000 km of HSR and linking up those HSR with the surrounding countries which are under the AIIB/Silk Road plan. There will be more infrastructure, properties/cities to be build along those town connecting / along the HSR lines.

Secondly, as China tech up, it will become even more energy hungry than before, and more people will go into the energy sector - which means more coal miners (even though Chinese authority are trying to shut them down but as reality of energy requirement hits) and workers in mining sector. More workers to build energy infrastructure - power plants, power lines, delivery systems...etc. And even more workers to maintain these infrastructures.

Second, average wage is rising, along with standards of living. A single migrant worker probably earns twice as much today, even taking into account inflation, than a similar worker might have earned 15 years ago. Further, there are many more better job opportunities as China's economy expands its service sector. As the middle class becomes more prosperous, they become able to hire nannies, go to spas and restaurants more often, etc. All of those services are overwhelmingly staffed by migrant workers. What's more, those jobs are staffed by *female* workers. Rural residents have been allowed for over a decade now to have a second child if the first was a girl. That means if we take into account the *female* work force, then there would be no noticeable labor shortage.

It doesn't matter if wage is rising - the labourers are barely catching up with the CPI. And they will soon hit the middle income trap as companies and corporations looking for cheaper alternatives (like the news indicated - robotics....or moving factories to third world countries) to maximize profit. This will in turn create downward pressure on wages - as seen in Taiwan, America, Japan... where wage largely stagnated or even going backwards.

I have recently visited China and the Chinese I have talked to all said the same thing - you can't survive on one labourer wage alone and nevermind retirement! The biggest problem with this is that majority of migrant labourer are poorly educated, and being aged worked (in their 40s) means the prospective is extremely limited - they can't be expected to go back to school, nevermind going to university to get a degree. It is precisely because of this they will be trapped in their predicament as labourer for the rest of their live. If they are smart - they might save up and invest by opening up shops or restaurants, but China's business/service sector is already highly saturated - if you ever visit China you will see what I mean - shops are opening up and closing down due to intense competition on daily basis.

Now - about nannies - remember the current chinese predicament of young couple not wanting kids? There will be so few kids for large pool of people who wants to be nanny which only means more unemployement. Not to mention as China tech up and modernize - there will be more requirements for workers to get "licensed" or certificated which means a large portion of them won't be able to do as they can't afford to go to school (can't afford the time, nor the money).

Also, remember the problem we are talking about is NOT the younger generation where they have the options and the education - the problem we are talking about is the older 40+ yr old migrant workers with limited education. Like I said previously - as China becomes more affluent - they will want their nannies to be "certified".

Third, let's face it, migrant workers do not live as long as middle-class people. Ubiquitous smoking, drinking, and pollution means their average life expectancy is probably around 60. It's might not be a pretty thing to say, but I don't think China will face quite the same kind of population pressures as Japan.

I certainly do not dispute that China will be facing some population pressure, but I don't think it will necessarily be more dramatic than what we are seeing right now.

Now, you bought up an excellent point!
Perhaps that's a cheapest and most economical policy Chinese government can implement.... to encourage even more smoking and drinking by opening up more bottleshops and liquor stores and create more liquor factories to make it cheap and plentiful!

As these 40+ yr old's prospect become dimmer by the year majority might hit the bottle and thus shorten their lifespan. The Australian government did it before - allowing cheap and plentiful of liquor to flow through aboriginal community and it devastated the aboriginal community as average life expectancy is less than 70 (10 years lower than non-aboriginal). But the problem with this of course is what kind of social impact it will bring when liquor is plentiful. High crime rate, traffic accidents, domestic violence.....it won't just kill the older 40+ generation, it will have collateral effect on the "valued" middle and upper class too as they too may fall victims to them (or victims to the disenchanted migrant workforce). So it will create a breakdown of social order.... not an ideal solution.