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OM in the News: Retooling China

July 12, 2018

It isn’t clear how long it will take for the rest of China to follow Dongguan’s example.

Factories in the southern Chinese city of Dongguan once employed what one employee called a “magnificent sea of people.” But rising labor costs and a new generation of Chinese with little interest in toiling in factories forced a new tack, reports The New York Times (July 5, 2018). Now the sea of people is being replaced by a whirring array of boxy machines, each performing work that used to take 15 people. The factory changes suggests that Beijing’s vision of Made in China 2025 — the ambitious state-driven plan to retool China’s industries to compete in areas like automation, microchips and self-driving cars —is coming from the bottom up: from the businesses and cities across China that know they must modernize or perish. Dongguan long relied on making and exporting shoes, toys and electronic parts to the U.S. and Europe.

The average worker’s income rose fourfold over the past decade. Fewer young people wanted to work on dull and stressful assembly lines, preferring service jobs — like waiting tables and delivering e-commerce packages — that let them interact with people or move around. Some factories moved to lower-cost countries or shut down for good. Dongguan’s companies had to do something. They committed to modernizing.

Mentech, a telecom equipment supplier there, once had hundreds of workers winding, packaging and testing magnetic wires, all by hand. Today, the company is desperate for workers. On the side of one factory building it lists the on-the-job benefits it offers: monthly wages with overtime of up to about $1,100, air-conditioned dormitories, and free Wi-Fi.

Today, a factory floor that once needed over 300 workers now needs 100. More than half of the factory has been automated. The workers clustered around the machines will probably be replaced by machines themselves in a year or two. “The biggest trend in manufacturing is that automation is irreversible,” says a Chinese industry expert.

Classroom discussion questions:

  1. In what ways has Chinese manufacturing paralleled the history of manufacturing in the U.S?
  2. Why are Chinese firms having trouble staffing their factories?
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