Economy

Labor woes may spur further automation moves at home

By Li Fangfang (China Daily)
Updated: 2010-06-17 09:55

BEIJING - Recent wage disputes and labor shortages in areas of China may speed up automation for some domestic manufacturers as a possible option to offset increasingly expensive labor.

"Labor costs will continue to surge in the future. This will force Chinese manufacturers to promote and upgrade their production automation in a bid to gradually offset their dependence on human labor," said Wang Liming, an analyst with consulting firm China International Capital Corp Ltd (CICC).

From the beginning of this year, labor costs as well as labor shortages have began to be a problem for both local and international manufacturers with production here.

China, especially the Pearl River Delta region, experienced a serious labor shortage after the Spring Festival, with 70 percent of companies challenged to find enough help, 5 percent more than last year, according to a survey by the Ministry of Human Resources and Social Security. Low wages was the top reason keeping migrant workers from returning to work after the holiday.

In reaction to the problem, 14 Chinese provinces, municipalities and regions, including Shanghai, Tianjin, Zhejiang, Guangdong, Fujian and Shandong, have lifted monthly minimum wages by between 10 percent and 20 percent year-on-year.

According to a survey released by the Hong Kong Trade and Development Council, wage expenditure accounted for roughly 20 to 30 percent of total production costs in the garment industry. On average, a 17 percent pay rise translates into a 4 to 6 percent rise in total production costs.

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"From a long-term perspective, replacing laborers with sophisticated machines will be an inexorable trend," said Wang of CICC.

According to ARC Consulting Group, in the coming five years, investment in production automation is expected to grow rapidly.

Italian industrial automation products supplier Comau said that it has found huge potential for its robotics in China's booming automobile industry.

As China is restructuring the automobile industry and encourages larger, more competitive vehicle production groups, the mode of manufacturing will change via the further use of automation like industrial robotics, said Comau.

Currently, more than 1 million industrial robots are being used across the world, with only 30,000 in China.

However, "we see great robotics demand in the Chinese market, especially from domestic manufacturers", said Mark Kingsley, head of robotics with ABB Group, one of the world's largest engineering companies.

Seeing the potential business opportunity, the Swiss company relocated its global robotics business headquarters from Detroit to China, becoming the first multinational company to produce industrial robots in the country.