China searching for new engines to turbocharge economic growth

Source: Xinhua | 2019-02-27

Like birds pecking at grain, a dozen robotic arms pressed components onto a POS machine, checked its functions and packed it into a box under the supervision of a human worker.

Next to the robots, it took over 60 workers to assemble the same device, used to process card and mobile payments.

The two juxtaposed assembly lines at the Kingtronics factory offer a glimpse into the robotic revolution sweeping southeastern Fujian Province. Like China’s other coastal regions, rising labor costs and dwindling foreign orders are galvanizing labor-intensive factories into action.

Instead of shrinking production, Kingtronics chose to deploy more robots, a strategy that not only raised the company’s profits but also allowed the Hong Kong-invested firm to expand its business by designing and selling automatic equipment to manufacturers that cannot afford imported robots.

“We anticipate a market that has no boundaries, as many medium and small-sized enterprises welcome automated solutions,” said Henry C. Tseng, chairman of the company in the city of Zhangzhou.

Defying the current economic downtrend to register robust growth, Kingtronics and many other private firms point to the micro-economic tenacity of China as it struggles with an economic slowdown and uncertainties posed by trade friction with the United States.

About three years after China initiated supply-side reform to restructure and upgrade its industries, economists say new momentum is emerging from the transitional labor, bolstering confidence for the “Two Sessions” that will outline China’s development in 2019, a “key year” in its goal to build a moderately prosperous society in all respects.

As the annual sessions of the national legislature and political advisory body in early March move to identify new engines to turbocharge the world’s second-largest economy, how to help such market players tide over the tumultuous transition period is also a heated topic.

During a State Council meeting in January, Premier Li Keqiang said the country’s development faces a more complicated environment this year, with growing challenges and downward pressure on the economy.

China’s economy grew 6.6 percent in 2018, above the official target of around 6.5 percent, but lower than the 6.8 percent in 2017.

Apart from the threats of rising protectionism abroad, officials and experts also point to flaws in the domestic economy, including an oversupply of low-end products and lack of innovation. This year’s “Two Sessions,” where the government’s work report for 2019 will be released, are expected to renew calls for deepening the supply-side reform to move the industry up the value chain.

“Traditional export-oriented companies faced considerable difficulties during the industrial transformation in 2018,” said Huang Maoxing, an economics professor at Fujian Normal University. “But after the twinge, a rebound is almost certain in 2019 thanks to new momentum accumulated in the transition.”

The transition Huang referred to is now the order of the day across China. In provincial-level “Two Sessions” that preceded the national event, a majority of Chinese provinces lowered their GDP growth targets for 2019 and stressed high-quality development with promises to nurture new industries and upgrade traditional ones.

Fujian, known for its booming electronics and garment industries, has seen more and more factories embracing automation, leading to a 16-fold increase of imported industrial robots in the first 10 months of 2018.

In northern Shanxi Province, coal firms are switching to new energy and new materials as the coal-rich province cut redundant capacity. In the past three years, Shanxi phased out 88.4 million tons of coal capacity but sped up new energy development, including extraction of coal-bed methane that now accounts for over 90 percent of the national total.

One firm, Shanxi Uni-moon Green Paper, is reaping early rewards from the clean energy transition. The subsidiary of a coal enterprise has developed a technology to manufacture paper out of gangue, a coal-production waste. By producing an annual 120,000 tons of such “stone paper,” the company estimates it will save 2.4 million trees.

Despite the temporary loss of GDP tempo, Yan Linhu, deputy general manager of the company, spoke highly of the industry’s move toward a healthier development model featuring a higher input of innovation. “The coal industry is under a lot of stress, but it’s a positive sign that all companies are seeking changes,” he said.

Chinese cities are also weighing in on the wave of transformation with supportive policies. Chongqing, a production base for cars and laptops in southwest China, is luring in developers of Big Data, artificial intelligence and industrial robots to revitalize its manufacturing sector.

In 2017, the municipality ended a 15-year streak of double-digit growth after its GDP growth slowed to 9.3 percent, which further dropped to 6 percent last year, as a saturated domestic car market dragged down the city’s auto output.

Seeking a change, the Chongqing government in 2018 inked an agreement to house Alibaba’s regional headquarters, hoping to benefit from the Internet giant’s cloud computing and AI prowess.

It followed another deal between the city and Tencent, another tech heavyweight, to cooperate on Big Data and smart technologies.

Data has revealed signs that such efforts are paying off, according to Yi Xiaoguang, director of the Chongqing Institute of Comprehensive Economic Research, who points to a quadrupled increase in the contribution of high-tech industries to Chongqing’s industrial output in 2018.

“It shows the new growth engines are gaining steam, and in due course, will rise to become the new economic pillars,” Yi said.

Other good news for China’s economy will come from the unified foreign investment law, which will be discussed during the “Two Sessions.”

Once adopted, it will help foster a more favorable business environment and attract more foreign investment.