Higher Pay Could Mean ‘Made in China’ Equals ‘Made by Robots’

The heartland of Chinese manufacturing is currently facing surging wages and labor shortages, two things that threaten its role as workshop to the world.

Rather than succumbing to cheaper competitors though, factory owners in the Pearl River Delta are rising to the challenge.

That’s what Standard Chartered Plc found by surveying more than 200 manufacturers in the region, which spans the eponymous river mouth in southern China, just across the border from Hong Kong. Automation is the way out for factories facing wage pressure, according to the 68 percent of respondents who plan to increase capital expenditure this year.

Investing in automation and robotics can give the economy a "much-needed productivity boost," analysts wrote in the report of the survey published this month. "We believe that what doesn’t kill the PRD, and instead pushes the region’s manufacturers to upgrade and reinvent themselves, will make China stronger."

The poll has been run in each of the past eight years, during which factories have been complaining about rapidly increasing wages and the difficulty in hiring enough workers. The delta is located in the nation’s biggest regional economy, Guangdong, which generates more than $1 trillion a year in output, and boasts the new innovation hub of Shenzhen, commercial center Guangzhou and many smaller, prosperous cities around them.

Higher-end manufacturers in sectors such as semi-conductors prefer to stay in the increasingly expensive region with more automation and investment, while lower-end ones such as textile and garment makers, are more willing to move to cheaper nations, according to the report.

"On the one hand, you see the competitive ones are investing more to stay competitive, but at the same time, there is also the emerging trend of moving overseas because it may not be ideal for some to stay within the Pearl River Delta, " said Kelvin Lau, Hong Kong-based senior economist who led the survey.