Robots will help Chinese firms cope with wages and the trade war

Esquel, a Chinese company, is a leading manufacturer of shirts for Western brands like Hugo Boss and Tommy Hilfiger and also for its own brand, PYE. The firm has 56,000 employees but is constantly focusing on mechanising tasks in the shirt making process so that its employees can focus on more value added work.
The garment supply chain is brutally competitive. “The work is repetitive; piece work makes it all the more soul-sapping. It is relatively hard to automate soft materials like textiles; making Esquel’s shirts involves up to 65 fiddly sub-processes, such as stitching sleeves and cuffs. As soon as labour costs rise, textile and garment factories tend to fly away, seeking cheaper fingers to work to the bone, be they in Bangladesh or Ethiopia. Esquel plans instead to keep lots of its work in China…even if American tariffs rise further, many Chinese companies are betting heavily on automation to remain competitive. In 2017 China’s installations of industrial robots rose by 59% to 138,000, more than in America and Europe combined. While downplaying its controversial “Made in China 2025” industrial policy, to soothe the fears of the Trump administration, the Chinese government is happy to throw money at existing manufacturing industries in order to help them tool up. That will help keep the robot revolution running.
Walk through Esquel’s biggest factory in Foshan in the Pearl River Delta and it is clear that even here the robots are coming. The hundreds of workers sitting, heads down, in pink caps are a sight to behold. They are also outnumbered by machines. On some lines, robotic arms swish, trimming collar bottoms and pressing plackets. The devices do fiddly jobs like making sure that tiny pearl-coloured buttons for Banana Republic have the word Banana on the top. Israeli cameras, adapted from military devices, use artificial intelligence to scan for flaws in the fabric, automating one of the most mind-numbing of jobs.
Some workers have been displaced but productivity has improved, keeping the firm’s profits stable despite a tripling since 2006 of its average monthly wage in China, to 4,500 yuan ($650)… Despite the frictions, Marjorie Yang, Esquel’s chairman, is in effect doubling down on China. She touts a 2bn yuan investment in a new factory in Guilin, a picturesque region, including a yarn-spinning division so high-tech that visitors are not allowed to walk the floors. So far Esquel’s products have been spared American tariffs. American clients are nervous, so if need be the firm could shift some production to its factories outside China, such as in Mauritius, while moving other lines back home.”