Will Robots Replace Human Workers in China?

If you look at the back of your iPhone or iPad you will see that it was "Designed by Apple in California Assembled in China." The Chinese assembly is handled by a Taiwan-based company called Foxconn. According to The Economist, its one million workers may make it China's largest employer. But humans are increasingly expensive, so Foxconn is now looking into replacing some of them with robots.

China’s competitive edge has long been its vast supply of cheap hands. But as the country grows richer, skills shortages are driving wages rapidly up. Foxconn’s decision to alter its mix of capital and labour is thus logical, and mirrors what many smaller firms are already doing.

Rising wages are good for Chinese workers, and for firms that want to sell them things. But they also raise questions. Do they spell an end to the cheap “China price” for manufactured goods? Will multinational firms shift production elsewhere? Or will Chinese firms adapt nimbly to automation and remain fearsome competitors? They might, but Chinese robots may be no cheaper than robots elsewhere.

Finally, will the shift to a more capital-intensive capitalism throw legions of workers onto the streets? The Chinese authorities will be watching nervously.

Where will the next generation of cheap labor come from? India? Africa? These are the two areas that will add the greatest number of people over the next three or four decades, so they are the logical candidates.