China’s low-end manufacturing decline fuels worker displacement and economic strains amid automation push

China's labour pool is contracting — projected to drop from more than 900 million in 2011 to roughly 700 million by mid-century — while more educated, younger workers are increasingly resistant to working "dirty, hard and tiring" factory jobs (Representative Image)

China's former dominance in low-end global manufacturing is swiftly fading, closing factories, erasing jobs, and leaving millions of low-skilled workers uncertain as the nation drives toward automation and high-tech manufacturing, the Financial Times reported.

In the last ten years, producers such as Zhou Yousheng, whose shoe factory used to be prosperous in Guangdong, have experienced their fortunes fall because of increased wages, tensions with the United States over trade, and aggressive competition from nations such as Vietnam and Indonesia. China's global share of footwear exports has declined by 10 percentage points in the last decade.

A declining workforce, a deepening crisis

China's labour pool is contracting — projected to drop from more than 900 million in 2011 to roughly 700 million by mid-century — while more educated, younger workers are increasingly resistant to working "dirty, hard and tiring" factory jobs.

The makers are countering by investing in automation. GAC's electric vehicle factory in Guangzhou is a case in point, with a target of cutting its human staff by 10% a year and high dependence on robot systems.

However, for small-scale factories producing garments and the like, the capital needed to automate is beyond their reach. These companies are being driven out or taken over by larger operators, speeding job losses in industries already severely impacted.

Large-scale layoffs in traditional industries

Research indicates that employment in China's manufacturing-intensive sectors declined by about 7.4 million jobs between 2011 and 2023. Employment in textile manufacturing alone declined 40% from 2011 to 2019. Even in the industrial parks created to cater to ailing sectors, jobs are now scarce, and local labour markets now stand almost vacant.

“China exploited its comparative advantage in cheap labour, but that game is now up,” said Frederic Neumann, chief Asia economist at HSBC.

Social risks of ‘technological unemployment’

The rise of automation and the decline of low-skill jobs are fuelling social unrest. Labour protests in China’s manufacturing sector surged to a decade-high of 452 incidents last year, according to the China Labour Bulletin (CLB), driven by closures, relocations, and unpaid wages.

Displaced labour — much of it rural migrants with little education — is increasingly being left out of official unemployment statistics, and their economic stagnation risks dampening consumer demand and exacerbating inequality.

“Massive automation is causing job losses in ways that might not be easy to counter,” Stanford researcher Scott Rozelle warned, predicting that political instability could arise if unemployment among the unskilled continues to rise.

Beijing’s high-tech gamble

Chinese President Xi Jinping has also been supporting "new quality productive forces" such as AI, robotics, and EVs to drive future growth. However, experts believe that these high-tech industries won't generate jobs enough to meet the number of displaced workers from traditional industries.

Even as officials seek to prop up traditional industries and retrain labourers, officials admit that the shift could create additional job losses. "We want to make new jobs," a government source said, "but the disruption is real."

As China strives to make giant strides technologically, it has a harsh dilemma: how to avoid the social consequences of leaving behind the very workers who constructed its economic miracle.