China badly needs robots to protect its economy from a shrinking labour force, report reveals

PUBLISHED : Friday, 13 January, 2017, 8:03am
UPDATED : Friday, 13 January, 2017, 9:56am

Robotics, artificial intelligence and machine learning can help offset China’s productivity decline caused by the shrinking labour force, according to a research report published on Friday.

But the country will face challenges in preparing a large number of workers for the incoming automation age, according to research by McKinsey Global Institute.

Without productivity improvements, China will be short 600 million full-time workers to maintain projected GDP growth rates. But early adoption of automation could lessen the gap by about 100 million, the research suggests. Its projection puts China’s compound annual GDP per capita growth rate at 4.9 per cent.

The ageing population has exacerbated bearish sentiment about the world’s second-largest economy after its working age population fell for the first time in 2012.

The government estimated those aged between 16 and 59 would decline 23 per cent to about 700 million by 2050.

Countries with severe ageing problems have deployed robots in their factories.

South Korea has the world’s highest robot density of 531 industrial robots per 10,000 employees, followed by 398 in Singapore and 305 in Japan, according to a 2016 report by the International Federation of Robotics.

China has a density of 49, but it has been the world’s biggest robot market since 2013, the IFR says.

Beijing has vowed to modernise its factories with more robots under its “Made in China 2025” initiative launched in 2015.

“At this moment, China is investing the most in automation,” Joe Ngai, managing partner of McKinsey’s Hong Kong office, told reporters on Thursday. “I think China will make big progress in adopting automation in the coming years.”

Globally, automation could ease the negative impact from a shrinking work force by raising productivity growth by 0.8 to 1.4 per cent annually, according to McKinsey.

“Roughly half of the sources of economic growth from the past half century will evaporate as populations age,” the report said. “The productivity growth enabled by automation can ensure continued prosperity in ageing nations and provide an additional boost to fast-growing ones.”

Meantime, automation would transform the workplace, as 49 per cent of the work conducted by humans today could potentially be automated with existing technologies, it said.

Accommodation and food services have the highest automation potential, followed by manufacturing, while education is most difficult task for robots, according to the report.

Even chief executive officers can relinquish about 25 per cent their work to machines, the research finds.

The growing presence of robotics in farms, factories and even hospitals has already triggered concerns of rising unemployment.

Disruptive labour market changes, including the adoption of robots, would result in a net loss of 5.1 million jobs by 2020 in 15 leading countries, according to a 2016 analysis by the World Economic Forum.

The new report suggests labour shortages are still more likely than surplus with robots joining the workplace, although countries have to help workers develop new skills suited for the automation age.

In China alone, work activities that can be handed over to machines make up the equivalent of 394 million full-time employees, compared with 1.1 billion globally.

Ngai said workers in the automation age should focus more on communication and management, while machines would be responsible for the repetitive, physical tasks.

“This is not scary at all,” Ngai said. “Automation is not to take away jobs, but to change what workers do on the job. It enables people to do what humans should do.”