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Our views on how changing market dynamics may lead to demand for capital in niche sectors of the economy.

Automation of a Nation – Structural transformation in China and the opportunities for UK companies

2368_viewpoint-roboticsChina’s development into the world’s largest manufacturing nation and the corresponding meteoric rise in GDP over the last 20 years is as intimidating as it is awe inspiring. Population figures dwarf our own tiny island’s by approximately 21:11 – equating to a working age potential labour pool of roughly a billion people. This manpower, combined with low wage rates, led to China emerging as the world’s factory, driving average GDP growth of 10% p.a. between 1991 and 2011. China is now the world’s second largest economy and its largest manufacturer.

Although China’s growth is slowing, forecasters are still predicting GDP increases in excess of 8% p.a. to 2017 versus average UK GDP growth of only 2% p.a. The scale of GDP in absolute terms is equally compelling with China estimated to have produced $8.3 trillion in 2012 versus a UK GDP of $2.4 trillion. However China is near to reaching the peak of its population of working age citizens and is facing escalating wages and a reduced labour pool in the future. It is therefore undergoing a necessary structural shift and entering an age of automation to decrease costs and improve efficiency.

Despite the fact China is set to become the world’s largest industrial cyborg market it still lacks the skills set to service the demand via an indigenous automation industry. Therefore China is looking to the west to import the relevant technologies for its modernisation and seeking strategic partnerships to plug its innovation gap. Several British companies have started to focus their sights towards market entry into China, to capitalise on this mega trend, but can old Saint George really take on this twenty-first century dragon?

We believe if supported by the right partner, with the relevant local knowledge and expertise, UK automation companies could gain a significant advantage from driving forward their China strategy now. However daunting China’s future global dominance is to the western world it is far better to be a participant and reap the benefits, rather than be a mere observer held back by fear.

It is only a matter of time before China becomes the largest automation technology market in the world. The question is will you be part of it?