Has China’s excessive automation and robotisation caused overcapacity ?

Frans Vandenbosch 方腾波 28.04.2024

Back in 2015…

Back in 2015, living in Suzhou, working in Wuxi, I noticed an overwhelming wave of investments in automation and robotisation. In the automotive industry, automation was already very common. But in small manufacturing enterprises, there were assembly lines with dozens of mostly female workers. These were the young sons and daughters, born in Western China who moved to the more developed cities at the East coast of China.
At that time, salaries were moderate, and the quality of the products was not top level. Competition was based on price, not on quality.

But then, almost all of a sudden, I noticed an explosive growth of Chinese automation companies. These companies were designing automation, integrating sensors, quality monitoring camera’s and robots in the assembly lines  up to complete assembly lines without the need for operators.

In most cases, the excessive investment in automation was economically and financially unjustifiable. Salaries were going up, but there was not an urgent need to invest in automation to save labour cost.
Then, why were all these  small and big Chinese companies so heavily investing in automation ?

It’s the quality, stupid

Manual assembly depends on humans, and humans are fallible and unstable. These Chinese entrepreneurs had understood that if they wanted to take the quality of their products to a higher level and thus compete with products from more industrially developed countries, they had no choice but to invest in automation.

A robot or an automated assembly machine does not make the mistakes that a sometimes absent-minded or inattentive person makes. A robot is making or assembling products in a steady, stable pace. It can be fine tuned step by step until perfection.

At that time, back in 2016, I have seen complete assembly lines from raw materials until the loading in a shipping container. Often, these assembly lines were operating in a production hall entirely in the dark, with no people at all in the entire production facility. Naturally, a quality engineer will inspect the line and the products at regular intervals. And if necessary, an automation engineer will adjust the robots and automation systems.


Very few people, let alone the famous western economists realized how this wave of automation in China was having profound consequences for the economy in the West. When, one year later, the salaries in China were rising significantly, most western economists were convinced that the automatization wave was to save labour costs. It indeed sounds logical. But the truth was much more profound and with far-reaching consequences.

As I have written in several articles and emails at that time: the western economy will be unable to  withstand this. The Chinese automation wave will cause a significant improvement in the quality of Chinese products and combined with the very competitive price of Chinese products; this will be a serious blow to the Western economy. Nobody believed me, nobody was ready to understand the consequences. Western industry did not want to know and did not take the necessary measures to improve their global competitiveness. Western governments did not realize that the death sentence of their economy was coming.


Today, with the investments in automation almost written off, we are seeing the astonishing results. China is making top quality products at a very competitive price level, often ¼ or less than the price in western countries.

The automation wave in China continues to this day and will go beyond what we have ever seen in the West. Once the automatic production lines are functioning, it is easy peasy to increase the speed or set up a second copy/paste production line.

China indeed produces all kinds of products, semi-finished products, luxury products, advanced technology, nutraceuticals, excipients, pellets, and other basic raw materials for medicines. They are making these products for the huge Chinese market and for export to countries all over the globe.
Does that mean that there is any overcapacity in China ?  Is a surplus capacity, a capacity to produce more than what’s needed for local consumption, an overcapacity ?
The “overcapacity” where Blinken is accusing China from, is a fairy tale, a narrative to blame China for the lack of competitiveness of the American economy.

The automation and robotisation wave, started in China in 2015 was even accelerated by the US tariffs from 2018 on. Today in China it is a given that when a new production is set up, it must be fully automated. And we are not at the end yet. In addition to the automation wave, there is now the new AI wave. This is gradually conquering the automatic production lines, so that soon even the quality engineer or automation expert no longer will have to intervene.


In summary, I must conclude that the Chinese entrepreneurs who invested in automation back in 2015 were after all very right. They had the vision and long-term planning. For Western companies, the only choice remains between cooperation with China or total collapse. Western economical experts didn’t noticed this wave; they were – once again – wrong.