China: Can the long term growth momentum sustain by automation?

Gerard Burg, Senior Economist at NAB, explains that China faces growing demographic pressures, as the country’s working age population continues to decline and these challenges mean that China needs to rapidly increase labour productivity in order to continue its economic development and while greater investment in education is part of the solution; however firms are also likely to increase automation – a growing global trend.

Key Quotes

“The past two decades have seen a massive increase in the adoption of robotics and automation in manufacturing processes around the world – particularly in advanced economies, where technology has been utilised to offset their labour cost disadvantages relative to emerging economies.”

 “Asia has rapidly become the most important market for robot manufacturers, with the region (including Oceania) accounting for around half the total installed capacity globally and the largest share of industrial robot sales in 2015. China has been the largest individual market since 2013, but lags well behind the global average for robot density.”

“China’s demographic decline is the country’s key long term economic challenge. If successfully implemented, the expanded use of robotics and automation may offset the negative impact of the declining size of China’s workforce, but authorities will need to ensure that the opportunities are not wasted by derailing other essential reforms.”