China is world's fastest-grow­ing mar­ket for in­dus­trial ro­bots

The Pak Banker - - Front Page - Su­ran­jana Roy Bhat­tacharya

THE In­ter­na­tional Fed­er­a­tion of Ro­bot­ics po­si­tions China as the world's fastest-grow­ing mar­ket for in­dus­trial ro­bots. In­stal­la­tion of multi-role ro­bots rose by 136 per cent from 2008 to 2011 and will grow an­other 15 per cent this year. The coun­try is in a hurry to play catch-up with ma­jor in­dus­trial pow­ers. Con­sider this: China uses only 21 ro­bots per 10,000 work­ers in man­u­fac­tur­ing, way be­hind Ger­many's 259 and Ja­pan's 339.

It is no co­in­ci­dence that China is now poised to be­come the world's largest mar­ket for in­dus­trial ro­bots. The work­ing class pro­file is chang­ing dra­mat­i­cally as in­dus­tries come un­der in­creased pres­sure of ris­ing labour costs. Ur­ban­i­sa­tion and rise in in­ter­na­tional prices of re­sources have weak­ened the cost ad­van­tage China held so long. Ur­ban­i­sa­tion has crossed 51 per cent, which means more than half of its pop­u­la­tion now live in cities, de­mand­ing bet­ter ameni­ties and in­come. By 2020, there will be 600 mil­lion mid­dle class peo­ple, whose as­pi­ra­tions the state, mar­ket and in­dus­try must meet.

The low cost-driven growth model, which gave China spec­tac­u­lar suc­cess, has peaked and must nec­es­sar­ily give way to trans­for­ma­tion. Ac­cord­ing to the In­ter­na­tional Mone­tary Fund, China's per capita GDP was $5,414 (Dh19,870) in 2011, which im­plies that its eco­nomic and so­cial de­vel­op­ment has en­tered a crit­i­cal tran­si­tional stage. A coun­try is said to be on the verge of ad­vanc­ing from a mid­dlein­come to high-in­come so­ci­ety when its per capita GDP reaches the wa­ter­shed mark of $4,000. Ja­pan, South Korea and de­vel­oped Western nations crossed this thresh­old by chang­ing their in­dus­trial struc­tures and tran­si­tion­ing from a la­bor-in­ten­sive to tech­nol­o­gy­in­ten­sive econ­omy.

Will China suc­ceed in do­ing this? The coun­try is at a crit­i­cal junc­ture, but sad­dled with a pop­u­la­tion that ex­ceeds 1.3 bil­lion. Eco­nomic logic dic­tates that it should grad­u­ally aban­don de­pen­dence on re­sources, cap­i­tal and in­vest­ment to drive its growth and, in­stead, use tech­no­log­i­cal innovations to boost its eco­nomic and so­cial de­vel­op­ment.

A per capita GDP of $4,000 or higher usu­ally boosts a coun­try's ser­vice sec­tor and fu­els rapid in­crease in con­sump­tion.

A sec­tion of an­a­lysts are op­ti­mistic that do­mes­tic con­sump­tion will re­place in­vest­ment as the ma­jor engine driv­ing China's econ­omy. A na­tional think tank has es­ti­mated that con­tin­ued ur­ban­i­sa­tion and in­crease in mid­dle-class con­sumers will spur in­vest­ment de­mand by at least $6.3 tril­lion in the next ten years.

As of now, China's in­vest­ment rate is about 50 per cent, which is very high com­pared with other coun­tries, al­though the growth in con­sump­tion has gained some mo­men­tum this year. In the first three quar­ters of 2012, China's fi­nal con­sump­tion ex­pen­di­tures - the sum of house­hold and gov­ern­ment con­sump­tion ex­pen­di­tures - ac­counted for about 55 per cent of its GDP, in­di­cat­ing for the first time in 10 years that the con­tri­bu­tion of con­sump­tion sur­passed that of the in­vest­ment. There is, how­ever, lit­tle to in­di­cate that China will give up its three decade-tested for­mula that re­lies heav­ily on man­u­fac­tur­ing and in­fra­struc­ture in­vest­ment. The em­pha­sis on in­dus­tri­al­i­sa­tion and ur­ban­i­sa­tion - with a dash of stim­u­lus and sub­sidy now and then - is likely to re­main.

In­fra­struc­ture

stim­u­lus no longer makes head­lines but is con­stantly un­der­way. Led by lo­cal gov­ern­ments, a new wave of in­vest­ments in the third quar­ter en­sured that China did not hur­tle to­wards a dis­as­trous slow­down. In early Septem­ber, the Na­tional De­vel­op­ment and Re­form Com­mis­sion, ap­proved sub­way con­struc­tion projects in 23 Chi­nese cities, with a to­tal in­vest­ment of 840 bil­lion yuan. A fur­ther 21 road, high­way and port projects, 10 en­vi­ron­men­tal pro­tec­tion projects, 76 clean en­ergy projects, and sev­eral hy­dropower sta­tion and air­port con­struc­tion projects have also been ap­proved.

For­eign heavy ma­chin­ery man­u­fac­tur­ers in China an­tic­i­pate that fixed-as­set in­vest­ments in rail­way, high­way, en­ergy and real es­tate will in­crease 20 per cent an­nu­ally over the next four years. These com­pa­nies, which saw re­duced sales and rev­enue in the past year, be­lieve that there will be growth in 2013. Com­pa­nies like US-based Terex Corp, see the big­gest po­ten­tial in wind and clean en­ergy projects and in the de­vel­op­ment of sparsely pop­u­lated western China which is build­ing ev­ery­thing - from towns to power sta­tions, re­finer­ies and chem­i­cal plants.

With China plan­ning to keep the wheels of in­dus­try in quick mo­tion, it is lit­tle sur­prise that in­dus­trial ro­bot mak­ers are sport­ing a mech­a­nised smile.

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