China's Robot Revolution May Affect the Global Economy
Comment of the Day

August 23 2017

Commentary by Eoin Treacy

China's Robot Revolution May Affect the Global Economy

This article from Bloomberg caught my attention. Here is a section:

“By turbocharging supply and depressing demand, automation risks exacerbating China’s reliance on export-driven growth – threatening hopes for a more balanced domestic and global economy,” BI economists Tom Orlik and Fielding Chen wrote.
Pay gains are intact. Domestic manufacturing workers with a high-school education saw wages rise 53 percent from 2010 to 2014, according to China Household Finance Survey data cited by BI. 

“Increasing use of robots should be bad news for medium-skilled workers, especially those in sectors where routine work means scope for automation,” Orlik and Chen said. “Yet wage growth in China remains rapid, and if anything, medium-skilled workers conducting routine work are doing better than average.”

Eoin Treacy's view

Technological innovation has led to the pace of development speeding up. It will not have escaped the attention of investors that the original Tiger economies were able to evolve economically much faster than the Europe or North America during the Industrial Revolution. More recently China has come from relative obscurity to be the world’s second largest economy. What used to take generations now takes decades and the pace of development is speeding up so that we may witness multiple iterations in our lifetimes. As much youngest daughter delights in telling me, she was born the same year as the iPhone. 

The global birth rate has probably peaked. For example, the Bill and Melinda Gates Foundation is actively contributing to improved infant mortality figures, handing out free vaccines and empowering women to make family planning decisions. In turn that is achieving lower birth rates in some of the highest population growth areas in the world. In short, female empowerment leads to fewer but better educated children. Meanwhile life expectancy is improving which is the leading contributor to population growth at present. 

For the next 30 years these two trends are going to come into direct conflict with robots competing for jobs in a world with an increasing number of people. Once the global population peaks we are going to need all the robots we can lay out hands on. That is why Japan is watched so closely. It potentially offers a primer for what we might expect for the global economy decades from now. 

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