China’s economic emergency and the robot revolution
‘Much of the Chinese public has lost confidence in the economy, and its leadership’
China’s week-long “Two Sessions” talkfest is over for another year in Beijing as thousands of delegates streamed out of the Great Hall of the People. Two words hung on their lips, the economy, as the curtain went down on the Communist Party’s political event of the year.
Yet apart from the backslapping and bravado at this closely-choreographed shindig, the stark reality is shaded in tones of gray.
“The risk of China spiraling into an unprecedentedly prolonged recession is increasing,” Chris Lee, an economist and political strategist, wrote in a commentary last week for the Australian Strategic Policy Institute, a Canberra-based think tank.
“It’s on track for the longest period of economy-wide price declines since the 1960s,” he said.
“Coupled with the collapse of the property sector, a looming trade war with the United States and debt challenges, much of the Chinese public has lost confidence in the economy, and its leadership [the Communist Party],” Lee stressed.
Automation and robotics [are] undergoing a revolution.
SemiAnalysis
By the numbers:
- Household consumption in China is about 39% of GDP, compared to 70% in the United States and 52% in the European Union.
- Beijing must fix a raft of domestic issues, including the real estate crisis, spiraling local government debt and weak consumer demand.
- That has been triggered by high unemployment among the young, stagnating wages, dwindling social benefits, and stock market volatility.
Delve deeper: President Xi Jinping’s regime has rolled out billions of dollars of incentives to kickstart the domestic economy. But they pale in comparison to the one trillion yuan, or US$138 billion, high-tech innovation program.
Between the lines: “Automation and robotics [are] undergoing a revolution. The only country positioned to capture this level of automation is China,” SemiAnalysis, a San Francisco-based research group, pointed out in a report released earlier this week.
Bottom line: “[If] China [should] achieve it without the [United States] following suit, the production expansion will be granted only to China, posing an existential threat to the US as it is outcompeted in all capacities,” the study warned.
Big picture: But in Beijing’s rush to corner a future built on “automation and robotics,” China’s 734 million workforce would be decimated. The middle-class would be hollowed out and low-paid workers dumped on the scrap heap of history, fueling social unrest.
China Factor comment: The world’s second-largest economy has an inadequate social security net and healthcare services. Think Global Health described it as a “welfare crisis.” Automation will not solve that “crisis,” only exacerbate it.