Again within the heyday of China’s growth a decade in the past, Zhou Yousheng’s shoe manufacturing unit in Guangdong province employed greater than 100 employees.
In these days, China’s considerable provide of low-cost labour and extremely concentrated provide chains made it a dominant power in low-end manufacturing.
The nation’s share of world footwear exports, for instance, hit greater than 70 per cent simply over a decade in the past, based on figures from the World Footwear Yearbook.
However over the previous decade, Zhou has regularly seen the competitiveness of his enterprise erode amid stiff abroad competitors, a burgeoning commerce warfare with the US and weak home demand.
Wages within the manufacturing hubs of southern China, which have been as soon as the spine of the nation’s explosive financial progress, have risen steadily, whereas the competitors from rivals in south-east Asia has change into fierce.
China nonetheless dominates shoe manufacturing, however its share of world exports has slipped by 10 share factors over the previous decade, with a lot of that going to rival hubs like Vietnam and Indonesia, based on the Yearbook.
Zhou’s plant now employs fewer than 20 employees. “The future is bleak and hopeless if we continue like this,” says Zhou from his showroom in a principally empty wholesale market in a Guangzhou suburb targeted on worldwide commerce. “It would be difficult to return to how it was before.”
Factories throughout China on the low-end of producing are going through the identical dilemma — both they spend money on automation that shrinks the variety of jobs, or they slowly wither away.
The consequence, within the view of researchers and economists, is a painful shift away from low-cost, labour-intensive manufacturing that might go away thousands and thousands of older, decrease expert employees within the lurch.
Evaluation of 12 labour-intensive manufacturing industries between 2011 and 2019 by teachers at Changzhou College, Yancheng Lecturers College and Henan College discovered that common employment shrank by roughly 14 per cent, or practically 4mn roles, between 2011 and 2019. Roles within the textile business shrank 40 per cent over the interval.
An FT evaluation of the identical 12 sectors between 2019 and 2023 discovered an extra decline of three.4mn jobs.
“China exploited its comparative advantage over recent decades in terms of having an abundant labour force . . . and it really became the dominant manufacturer globally of labour intensive goods,” says Frederic Neumann, chief Asia economist at HSBC. “That game is now up.”
In some ways, Beijing dangers experiencing the identical “China shock” that it imposed on superior manufacturing nations after its entry to the World Commerce Group within the early 2000s, when orders migrated en masse from dearer hubs to a budget and environment friendly factories of Guangdong and different provinces. Now, the cheaper factories are in international locations like Vietnam and Indonesia the place exports have surged.
Western nations overcame China shock partly by growing consumption-powered economies and vibrant companies industries. Nevertheless, Chinese language chief Xi Jinping has made clear that “new quality productive forces” — or superior manufacturing — will stay core to the nation’s progress mannequin.
However analysts say manufacturing in high-tech export industries will likely be much less labour-intensive, and won’t present sufficient new alternatives to absorb the surplus labour by itself. “You’re not going to employ as many people by definition,” Neumann says.
Additionally they doubt that manufacturing alone can ship China’s progress targets, which political leaders set at “around 5 per cent” for the third yr operating in 2025.
An increase in localised unemployment dangers additional denting financial prospects and creating social strains that policymakers, used to many years of breakneck progress, are unfamiliar with.
China’s low-skilled migrant employees are particularly uncovered, says Gordon Hanson, a professor at Harvard Kennedy College who researches the labour impacts of the decline of producing.
He factors to the instance of Martinsville, within the US state of Virginia, the onetime “sweatshirt capital of the world”, the place in 1990 as many as 45 per cent of working-age adults have been concerned in manufacturing. Nearly all of these jobs “just disappeared” because the city didn’t reposition its financial system, he says — and right this moment the poverty charge is double that of the nation.
“I would expect where the major difference is in China, [is] you’re going to see a much more concerted government effort to staunch that disruption,” Hanson says.
“[But] if China thinks it can dominate green technology and dominate AI at the same time [as] it tries to deal with disruption, it may be in for the same lessons.”
The state is making some makes an attempt to prop up conventional manufacturing industries. That’s the reason Wang, in his forties, discovered himself practically 2,000km from house at a half-completed industrial park in southern China in February.
He was in northern Guangdong to seek out work within the area’s famed clothes business. “If I can’t get any, I’ll move on,” he says. Staying house for the vacation was not an choice. “I won’t allow myself to lose money this year,” he provides. “At my age, I need money.”
Wang is likely one of the employees caught up on this painful transition. He was searching for work at Zhongda Vogue and Know-how Metropolis, a joint initiative between officers in Qingyuan and neighbouring Guangzhou to create a “smart manufacturing base” for quick style.
Officers hope the location will appeal to small-scale enterprise throughout the province to arrange newer, extra technologically superior operations right here, boosting the competitiveness of the area’s sprawling clothes business.
Tasks like these throughout China are the state’s answer to the hollowing out of a spread of producing industries.
China shares of the export of 10 labour-intensive merchandise — together with house fixtures, furnishings, baggage, toys and others — peaked at practically 40 per cent in 2013, based on figures compiled by Hanson at Harvard Kennedy College.
Hanson’s figures present that China’s share of the mixed 10 items had fallen to lower than 32 per cent by 2018. Tariffs put in place by the US that yr have since accelerated the method, he says.
Even gadgets requiring extra superior processes are usually not immune. Amid tensions with the US, international and native firms have accelerated their efforts to “de-risk” their provide chains and reduce Chinese language manufacturing of every thing from iPhones to automobile elements lately.
The key beneficiary has been south-east Asia, with each Chinese language firms and their international clients accelerating efforts to supply extra items from rival hubs there.
Exports from Vietnam and Indonesia achieved compound annual progress charges of 8.2 per cent and 12.3 per cent between 2019 and 2023, based on McKinsey. The 2 international locations have collectively added 10mn manufacturing jobs since 2011, based on official figures.
“It’s natural for a country like China, which is becoming richer and [where] wages are growing, to allow some of the more labour-intensive export-oriented activities to shift to other countries,” says Albert Park, chief economist on the Asian Improvement Financial institution. “Structural change is always hard on some workers and it’s a government and society-level choice on how protective you are of those workers.”
Manufacturing is way from lifeless in China, nevertheless. In a manufacturing unit in Panyu on the outskirts of Guangzhou, people work in synchronisation with machines to churn out new electrical automobiles each 53 seconds.
About 1,400 individuals work on this a part of the plant, which focuses on the ultimate meeting of automobiles underneath state-owned carmaker GAC’s Aion model.
Superior websites like this are an instance of Beijing’s imaginative and prescient for “new productive forces” in motion: high-tech machines run by good programs, churning out superior merchandise. President Xi even visited the plant throughout a visit to Guangzhou in 2023.
However in elements of the road — resembling when seven robots elevate, rotate and match windscreens on chassis passing on a conveyor belt — people are vastly outnumbered by machines.
Different duties, such because the hazardous welding and coating of automobile doorways are fully automated, whereas the general automation charge of the ultimate meeting course of is about 40 per cent.
That’s by design, says Li Xiaoyu, an engineer: the manufacturing unit has a aim of lowering its human workforce by 10 per cent a yr.
In stark distinction to the issues going through low-end manufacturing, Li says it has change into more and more tough for the manufacturing unit to seek out appropriate workers, who have to be in good bodily form and have a mean age of simply 22.
“Because China nowadays is similar to Europe: it’s very hard to find young people to employ,” he explains, gesturing on the manufacturing line under. “Ideally, we only want them doing relatively important tasks, like checking quality. These [other] positions we might eventually eliminate.”
Li’s issues are echoed by giant manufacturing enterprises throughout the nation: China’s demographic decline and a rising reluctance of a extra extremely educated youthful era to work on manufacturing strains implies that many more moderen factories are literally struggling to seek out the employees they want.
China’s working-age inhabitants peaked at over 900mn in 2011, however is forecast to shrink by virtually 1 / 4 to round 700mn by the center of this century, based on a Brookings Establishment report.
Policymakers, due to this fact, see automation and robotics as an crucial if the nation is to carry on to its long-term productive capability. If China doesn’t automate now, goes the considering, even its higher-end manufacturing will likely be outcompeted by rival nations.
The brand new progress created by high-tech jobs, they argue, will finally create a spread of recent jobs and customers, boosting employment on combination.
However there may be additionally an acknowledgment that, whereas improvements like automation will assist to deal with urgent labour shortages in sure industries, they could displace employees unable to adapt to new productive strategies.
“We are also fully aware that with the development of the current tech industry . . . there is a possibility of increased unemployment within traditional industries,” says an individual accustomed to officers’ considering.
“However, by continuously developing new productive forces and tailoring them to local conditions, we aim to create new job opportunities to offset and absorb the employment impacts of the transition within traditional industries.”
For these already working in high-end industries, the growth of automation and robotics will assist deal with the challenges posed by China’s quickly ageing and shrinking workforce, and liberate future employees from undesirable work.
“The new workers, such as those who are younger than us, are actually very reluctant to engage in such dirty, hard and tiring work,” says Chen Guishun, president of robotics at Shenzhen Inovance, certainly one of China’s largest homegrown industrial automation teams. “The demand for automation and robotics will become more and more urgent as a result.”
And whereas many in low-end sectors complain that they lack the capital or demand to justify costly funding in high-tech automation, Chen believes that even industries like clothes manufacturing, which are sometimes composed of nimble smaller-scale producers and are topic to irregular demand, will finally incorporate extra robots into their workforce.
“Many small enterprises of this type may gradually be replaced by larger-scale ones due to lack of technology or innovation . . . or if they are merged with other larger peers, their automation will accelerate,” he argues. “This could be an inevitable trend.”
However the place automation might help deal with labour market tightness in sure industries, it additionally dangers making decrease expert jobs more and more redundant, analysts say.
Dorien Emmers and Scott Rozelle, teachers at KU Leuven and Stanford, respectively, argued in a paper final yr that the fast upgrading of Chinese language business, in addition to its “massive push to automate” was additional lowering demand for such labourers, to the purpose that their wages had began to say no.
With the share of uneducated employees in China’s workforce increased than most higher middle-income international locations, the potential for disruption was heightened, they added.
Employees originating from rural areas, who Emmers and Rozelle argue are probably the most uncovered given decrease ranges of training, are solely partially lined by the nation’s official gauges of unemployment.
“When too many unskilled workers are squeezed out of upgraded industries, their wages tend to stagnate or fall, curtailing demand and hampering growth,” they wrote.
“This eventually leads to serious social problems, such as higher rates of unemployment and increased crime and social unrest. Nations with socially polarised work forces also suffer from political instability.”
It’s an open query how these traits apply to a one-party state like China.
Regardless of tight social controls, small-scale labour protests — typically confined to disputes and collective motion between employees and their employers — are pretty common throughout China.
And whereas the nation’s tight management over data associated to such occasions makes them onerous to trace, the China Labour Bulletin, a Hong Kong-based NGO, has seen a marked improve lately.
The CLB recorded 452 protests within the manufacturing sector in final yr, the best in virtually a decade, pushed by manufacturing unit closures, relocations and wage arrears. That adopted a tenfold improve in manufacturing strikes and protest actions the yr earlier than.
The CLB famous final yr how China’s transition from low-tech to high-tech industries has created “technological unemployment” of displaced employees.
Intense competitors inside these high-tech sectors, notably electrical automobiles, has triggered a worth warfare and a wave of firm and manufacturing unit closures, it added.
“In the last two years . . . we do observe more workers’ collective actions happening,” says Han Dongfang, founder and government director, including that the fast improve was notably acute within the manufacturing of electronics and clothes.
For employees in Kanglu, a garment manufacturing suburb full of hundreds of tiny factories and workshops — some no smaller than a single employee and stitching machine in an alcove underneath a stairwell — a high-tech future appears a good distance off.
At a neighborhood labour market, laminated pink indicators divide a transformed sports activities area into 5 areas: “semi-finished goods”, “jackets”, “coats”, “trousers” and “knitwear”. In earlier instances, the rows of discover boards they’re affixed to would promote lengthy lists of jobs within the space. These days, they’re largely clean.
In the course of the FT’s go to the sector was lower than 20 per cent full, with small teams of employees idling within the close by bleachers, or chatting amongst themselves by the doorway.
“It’s no good,” says one older potential labourer, earlier than being swiftly spirited away from a overseas reporter by a cautious safety guard. “[Nowadays] you can’t even earn Rmb100 in a day.”
Further reporting by Joe Leahy and Wenjie Ding in Beijing
