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“China seeks to shift its industry to the digital world”

“Chinese companies are indeed not very automated. They have around 50 robots per 10,000 workers, compared to more than 500 in South Korea or 300 in Germany ”Photo: Chinese Vice Premier Liu He during his meeting with Donald Trump at the White House in April 2019. JIM WATSON / AFP

tribune. Despite the agreement signed on January 15 in Washington as a sign of appeasement, the Sino-American trade war has already produced its first effects. The 25% taxes imposed by the Trump administration on the 250 billion dollars of goods imported from China to the United States – still in force despite Wednesday's agreement – have pushed certain foreign groups to relocate, such as Apple which, linked to Taiwanese Foxconn, plans to transfer part of its activity outside of China.

This is also the case of Korean Samsung, which has just closed its last factory in the country, in Huizhou, after 27 years of activity, to reopen in India and Vietnam. The relocation resulted in the deaths of a hundred of its suppliers and the loss of thousands of jobs in Guangdong. A trend that coexists with the temptation of the countries of Europe and North America to repatriate what may be on their domestic market, by betting on the factory of the future.

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This strategy is not always successful, as shown by the recent failure of Adidas, forced to close his two ” speedfactories “Established in Germany and the United States because they did not deliver on their return on investment and flexibility. With the key to a return to production in Asia!

Declining labor force in China

However, the trend towards leaving China could accelerate, however, knowing that the conditions which attracted the factories of the world to the Middle Empire are no longer as attractive as before. First, we should note a sharp increase in wages, a trend that has been well identified for almost fifteen years and which is confirmed each year, as China gets richer: between 2005 and 2019, the average hourly wage of a Chinese worker increased by more than 400% (from 8 renimbi to almost 40 renimbi an hour).

Added to this is the fall in the working population, a direct consequence of the birth control policy. In 2017, it fell below one billion workers, around 30% of whom are still in industry. They should be 830 million in 2030. There are also new environmental concerns, which had been sacrificed during the first phase of industrialization.

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Since then, the government has set targets for reducing the environmental impact, which of course weighs on production costs. And even if, in the current context of slow growth, the fight against pollution loses intensity, there will be no turning back. We must also take into account the tertiarization of the Chinese economy.

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