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Can Robots Save China?
beijing street graffiti
Key to the “Chinese Dream”: Air, Water and Robots
By Tom Green



Robots as heroes of the people

The ten-story obelisk near Tiananmen Square in Beijing that is China’s national monument to its heroes of the people may one day also pay homage to a distinctly non-human hero, the robot.

Meeting the needs of China’s present export-driven economy, while attending to the ever-expanding needs of its burgeoning middle class, will soon force China’s hand at an expansion in the use of robots the likes of which have yet to be seen anywhere on this planet.

It is China’s middle class that will drive all the staggeringly dramatic changes yet to come. Today, China’s middle class represents only 10 percent of the country’s citizenry; however, that number at 129M already exceeds the entire population of Japan.

Mindboggling numbers

A recent study by Seeking Alpha expects that over the next eight years the Chinese middle class will rise to over 50 percent, which would put it greater than the entire population of the European Union (500M).

Even if that near-fantastical increase turns out to be only half what’s been projected—like maybe only equaling the 314M U.S. population—the numbers are nevertheless astoundingly scary from the point of view of supplying goods and services.

chinese shoppers

It’s this middle class that will drive the creation of a mega-size domestic consumer group forcing a move up the value chain to more value-added and complex products to satisfy their rising needs and demands.

The buying power and expectations of these hundreds of millions of new consumers are as astounding as are their numbers: annual income approximately $16,000 to $35,000 (middle class is defined by the Organization for Economic Cooperation and Development (OECD) as those with the means to make spending decisions beyond just subsistence).

Even given that broad swath of income levels defined by the OECD, China, in effect, would need to triple production to meet that domestic market.

Combine this huge internal market with China’s already monstrous external export business, and one can easily see a level of productivity and quality incapable of being met by the country’s existing manufacturing infrastructure, especially manual labor.

Heroes of the people arrive

So how is China going to meet the demands of its home markets? Seeking Alpha sees it as a “time to invest in machinery rather than in a large number of workers doing mainly manual work.

foxconn

“Replacing human labor with machines leads to strong advances in productivity and profitability. In general, productivity increases through robotics and automation; increased size of manufacturing plants; and globalization of sourcing, leading to cost savings and deflationary effect on overall costs.”

According to the International Federation of Robotics, through 2015, China’s demand for robots will increase from 26,000 to 35,000. Given the predictions for China’s future needs for robots, the IFR’s 2015 estimate will skyrocket thereafter.

More in line with the real needs is Terry Gou of Hon Hai/Foxconn (Taiwan), promising to build and deliver one million robots to China, and already having delivered on the first ten thousand to a single manufacturing facility. Although most of these “Foxbots” sit idle in a Foxconn warehouse awaiting integration into actual manufacturing workflows, making way for robots is clear.

“The transformation from workers’ manual labor to using the robots means the models of production will be changed and the changes are complicated,” according to Xu Fang, director of the Center Research Institute at SIASUN Robot & Automation Co. Ltd.

With a future so filled with the importance of robots to national prosperity, the Chinese, as they have historically opted to do with other vital industries, will undoubtedly move to have all or most all of these robots built by indigenous robot manufacturers. Such a move is already afoot.

A new robot industrial base with an estimated annual output of $8B in Fushun City (northeast China’s Liaoning Province) will be in operation by 2017. Others will undoubtedly follow.

Crouching demons ready to pounce

The primacy of robots in China’s production capability is all but assured, except for the haunting specter of two crouching demons: deadly air quality and an even more deadly water supply.

bad water beijing

The growth of a massive robot presence in China striving to meet the needs of a half billion middle class newcomers could well be thwarted not by itself but rather by millions of people deprived of middle class status because of China’s horrendous physical environment.

China has about as much water as Great Britain: 6 percent the world’s water but with 20 percent of the world’s people.

Compounding that lack of supply is the fact that 43 percent of China’s water is “grade V”—meaning “no human contact”, which is actually useless even for agriculture; the country is putting billions of dollars into upgrading to “grade IV”, which is designated “industrial use only”,  yet grade IV is still not safe to swim in.

Reuters reported “China now has around 300 million people with no access to potable water, resulting in some 66,000 deaths per year.” The World Bank estimates the cost of water pollution to China at $22 billion, roughly 1.1 percent of the country’s GDP.” Going forward, China’s water demand will reach 818 billion cubic meters, experts say, and yet there’s only 616 billion cubic meters available.

beijing smog

And the air quality is no better than the water. The Atlantic Wire recently reported “China’s air pollution problem—which contributed to 1.2 million deaths in the country in 2010 — has gotten sharply worse in 2013.” The current death toll comprises 40 percent of all of the global deaths linked to air pollution.

And the threat isn’t contained to China. “China’s air pollution crossed the Sea of Japan and blanketed portions of southern Japan for several days. Nor does it stop in Japan. Research conducted in 2007 and 2008 found that 29 percent of particulate pollution in California originated in Asia.”

All of which begs the question: will there be a robust and vibrant Chinese middle class ready for these millions of robots to serve and provide for?  Or will this potentially wonderful advance in China’s population come to resemble more those 300 million in today’s People’s Republic who live on the equivalent of two dollars a day?

China’s resolve

When China’s new president Xi Jinping first unveiled his “Chinese dream” campaign at a National Museum of China exhibition, he defined that dream as “realizing a prosperous and strong country, the rejuvenation of the nation and the well-being of the people.” His words have since been plastered everywhere in China’s media.

All of what Xi Jinping said was very laudable and very achievable for the Chinese people. However, none of it will be possible unless China successfully addresses three key drivers of the Chinese dream: air, water and robots.

The best part is that China is fully aware of these three challenges and is doing something about each. Robots readying for a half billion new middle class consumers is well underway.

Success with air and water, on the other hand, looks grim. Many experts reason that China will need fifty years to succeed; the Chinese are promising to do it in ten. Tall order.

The robots, the rising middle class—and the rest of us—need China to succeed.


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