“Replace humans with robots,” added his successor, Hu Chunhua, 53, one of the youngest members of the Politburo, in a 950 billion yuan ($144 billion) plan to upgrade 2,000 companies in three years, the official Guangzhou Daily reported in March 2015, adding that the move is not expected to cause heavy layoffs.

Dongguan replaced 43,684 workers with robots in 2015, cutting costs at those factories by nearly 10 percent, according to the local government.

Lu Miao, a vice general manager of Lyric Robot in Guangdong’s Huizhou city, said the government pays as much as 50,000 yuan to Lyric’s customers for each robot they use to replace workers.

“The government at all levels in Guangdong has been encouraging companies to replace human workers as rapidly as possible,” said Lu. “I can see our business increasing more than 50 percent this year.”

?The ultimate result is so-called “dark factories” that don’t need lighting because only robots work on the production line. TCL has such a plant making LCD displays, Li said in an interview at the company’s headquarters in Huizhou, about an hour’s drive from Dongguan.

“For society at large, some workers will be laid off,” said Huizhou Mayor Mai Jiaomeng. “But it’s good for companies to improve their competitiveness.”Washed out

Local officials say the layoffs are under control, but are reluctant to provide details on how many plants have shut or moved away. A municipal report from Shenzhen in January said that the city has “washed out” or “transformed” more than 17,000 low-end factories over the past five years.
Instead, officials point out how Guangdong province is attracting new businesses, especially entrepreneurs, and building campus-style high-tech parks that are a far cry from the pollution-choked factories of the region’s industrial heyday 

Eoin Treacy's view

I was in Dongguan, Guangzhou and Shenzhen last October and the message coming from manufacturers was that business never really recovered from the loss of the US market after the credit crisis. The collapse in oil prices was affecting the Middle Eastern market while the broad commodity slowdown had affected emerging market demand. The strength of the Yuan during the same period in tandem with higher wages conspired to exaggerate this effect.

A measure of how much competitiveness has been lost is that a friend of Mrs. Treacy who imports jeans from Guangdong and sells to companies like Forever21 is looking for a buyer for the business because margins are now so thin they don’t believe the time and effort are worth it anymore. 

The response has been threefold. Some companies have simply decamped to lower cost countries like Vietnam, Cambodia, India and increasingly Ethiopia. Others have moved inland to source cheaper labour at the expense of longer supply chains, When I talked to the CEO of Sotfwear Automation earlier this year he commented on how surprised they have been with demand from major manufacturers in Asia who expect to be fully automated within the decade so they are investing today in order to achieve that goal. 

Just like every other country that has moved from a labour intensive manufacturing model to a more value added streamlined and services oriented model, there are going to be clear winners and losers. With tens of millions of people at risk of losing their jobs in China this represents a significant challenge for the Chinese administration as they continue to push for modernisation. It means that provision of healthcare, social security and education are now more important than ever in order to ameliorate the discomfort of the people who are being displaced. Visible improvements in standards of governance will also be required to help instil confidence the government is capable of handling this issue. The alternative is a rise in social discontent with potentially problematic ramifications.