[Industrial Revolution] Decoding Dongguan’s “Machine Replacement of Labor” Initiative
An article titled “Finding a Way Forward in Dongguan” published by the Economic Observer noted that, since 2008, the global financial crisis has led to widespread weakness in European and American markets, with shrinking orders persistently troubling Chinese suppliers. The continued relocation of major corporations abroad or their bankruptcy has triggered a wave of closures among Dongguan’s electronic instrumentation manufacturers. Statistical data show that, since 2013, the electronics and instrumentation manufacturing, textile, apparel and footwear, plastics, and metal products sectors have accounted for 44.1%, 11.8%, 7.6%, and 7% respectively of the city’s total number of business closures and shutdowns, together representing 70.5% of the overall figure.
2017-07-08
An article titled “Seeking a Way Forward in Dongguan” published by the Economic Observer noted that, since 2008, the global financial crisis has led to widespread weakness in European and American markets, with shrinking orders persistently troubling Chinese suppliers. The continued relocation or bankruptcy of major corporations has triggered a wave of closures among Dongguan’s electronic instrumentation manufacturers. Statistical data show that, since 2013, the electronics and instrumentation manufacturing, textile, apparel and footwear, plastics, and metal products sectors have accounted for 44.1%, 11.8%, 7.6%, and 7% respectively of the city’s total number of business closures and suspensions, together representing 70.5% of the overall figure.
Low-end manufacturing and OEM‑based enterprises are losing the very foundation for industrial development. This should serve as a wake-up call for Dongguan’s manufacturing sector—and, by extension, for China’s manufacturing industry—highlighting that they now face a profound transformation driven by sweeping changes in key factors such as human resources and land. “What is certain is that OEM firms that have failed to upgrade their operational capabilities and lack strong brands or proprietary technologies are being forced out; their era has come to an end,” said Zhu Keli, Executive Dean of the Zhishi Institute of Economic Research, who conducted field research in the Pearl River Delta around 2008.
The authorities may not agree with this view. Last July, as the current wave of factory closures was intensifying, Dongguan Mayor Yuan Baocheng publicly stated that Dongguan’s development must never be separated from manufacturing; it is essential to safeguard this “root,” for only by preserving it can the manufacturing‑based industrial chain endure.
Dongguan’s plan is to replace increasingly costly labor with machinery—a “machines-for‑workers” initiative. Each year, the city will allocate 200 million yuan in fiscal funds to support small and medium-sized enterprises in upgrading their technologies, which also represents a strategic pathway for modernizing Dongguan’s manufacturing sector.
In fact, the strength of an enterprise is a key factor determining whether it can undertake “machine‑for‑human” transformation. According to the sample survey results released by Dongguan, the stronger a company’s financial and operational capacity, the more pronounced its trend toward adopting automation. The survey also found that the primary obstacle to implementing such initiatives is funding: among the more than 150 sampled enterprises that have not yet embarked on “machine‑for‑human” upgrades, nearly half have postponed the move due to the substantial capital requirements.
From an industry perspective, the two pillar sectors—electronic information manufacturing and electrical machinery and equipment manufacturing—account for the largest share of “machines replacing workers” projects, representing approximately 33% and 37% of the total, respectively. Among specialized industries, the packaging and printing sector leads with the highest number of such projects, making up about 6% of the overall total. “A strategy of both phasing out and retaining is key to upgrading Dongguan’s manufacturing sector,” said a scholar close to the government. “Dongguan is home to nearly 300,000 small and medium-sized enterprises; it’s simply unrealistic to retrofit every one with automated systems. A certain number of firms will inevitably exit the market.” The scholar added, “On the other hand, the new social security policies signal that the government can no longer sustain large-scale, low-cost policy incentives for employment. Companies must make choices: retain skilled workers while letting go of those who can only perform low‑skill, routine labor.”
Following the 2008 financial crisis, Dongguan’s manufacturing sector as a whole suffered a severe setback. Rising RMB appreciation, growing worker rights awareness, and the gradual improvement of the social welfare system have all been reshaping the industry’s operating environment. The external business climate has been deteriorating rapidly. The preferential policies and cost advantages—such as low labor costs—that once sustained and propelled their growth have now turned into a quagmire that traps them. “Whether it’s government policy or market forces, the room for survival for small and medium-sized enterprises and low-skilled workers has been virtually exhausted,” the scholar noted. “This may sound harsh, but it is a necessary step that China’s manufacturing sector must take to move up the value chain.”
Source: Economic Observer (Beijing)
The tides of the times are steadily replacing manual labor with machinery. In Dongguan, Yipin Automation Equipment has gradually shifted its focus from semi‑automatic labelers to fully automatic ones—and is even aiming to provide customers with comprehensive packaging solutions and matching equipment in the future. Some may wonder: why, as waves of business closures sweep through the industry, do labor shortages persist? Does the substitution of machines for workers lead to unemployment, or does it create new employment opportunities? In our next installment of “Industrial Revolution,” Yipin’s editor will delve into these very questions.
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