Factories upgrading to robot assembly lines
The city in South China's Guangdong Province known as the "world's factory" is not experiencing a "wave" of factory shutdowns or capital flight, a top city official said Thursday in response to media reports.
Xu Jianhua, chief of the Communist Party of China's Dongguan committee, said hundreds of factories have shut down the past year due to the country's economic slowdown, but the number is limited, within a reasonable range and that more investments are coming in.
A total of 268 large-scale enterprises, or those with an annual revenue above 20 million yuan ($3 million), closed or went bankrupt in 2015, he said.
"But compared with the city's total of about 5,400 large-scale enterprises, the number of those that shut down is limited and under control," he told a press conference in Dongguan on Thursday. The number of newly-registered enterprises in the city was "three times" as many as the number of those which closed in 2015, he added citing official data.
Recent media reports said that Dongguan, which relies heavily on exports, has been experiencing another wave of factory closures in the past year, and that the trend "doesn't show signs of abating."
A total of 362 foreign-invested enterprises shut down or moved out of the city in 2015, 16.6 percent less than those which did so in 2014. But more than 960 new contracts were signed in 2015 which either increased the level of investments in existing businesses or added new projects. The capital involved in new investments is 10 times the amount of those withdrawn, Xu said.
In the face of domestic and global economic pressures, Xu admitted that problems and difficulties still lie ahead for this city, a manufacturing hub in the Pearl River Delta.
Industrial restructuring
"Some manufacturing companies have shut down or relocated to other areas such as Southeast Asia in recent years as production costs rise in China," said Yang Danhui, a research fellow at the Institute of Industrial Economics of the Chinese Academy of Social Sciences.
Yang told the Global Times Thursday that production costs rose not only because of rising labor costs but also because of energy and land costs along China's southern coastal areas, which makes Southeast Asian countries such as Vietnam more attractive.
And smaller companies, which cannot afford to relocate, have closed down, according to Yang.
The city is trying hard to restructure its industries from labor-intensive lower-end manufacturing to high-tech ones.
"Industrial restructuring is an important factor of the economic new normal for the city," Xu said. "We'll phase out some low-end manufacturing, and the closure of factories is normal, he noted.
A more skilled workforce will be indispensable in the restructuring. For example, about 835,000 college-educated technicians will be needed in the near future, according to Xu.
Janus Precision Components, a Dongguan-based original equipment manufacturer (OEM) for electronics companies like Samsung has been introducing hundreds of robots and automated machines in the past year.
Smartphone shells manufactured by industrial robots is expected to be 30 percent higher than shells manufactured by humans, Zhang Qi, a technician at the company, told the Global Times on Thursday.
It is not the first company which has replaced human workers with robots.
"I've been working in Dongguan for over 10 years, and the city has changed a lot," a 35-year-old worker at a local electronics manufacturer surnamed Chen told the Global Times on Thursday. Due to increased labor costs, many electronics manufacturers have replaced human workers with industrial robots to save on costs, he said.
Such a transition in the manufacturing industry will take sometime, said Yang.
"Both the government and the market need to be patient, because it would help optimize the industry and yield positive results in the long run," he added.
The city will continue to see a relatively robust economic growth of between 8 to 8.5 percent in 2016, according to Xu.
