Mechanical hand guides Chinese manufacturers into the future
More than relying on the invisible hand, China’s economy is also counting on high-tech mechanical arms to drive its manufacturing sector forward.
China has cemented its reputation as the world’s production hub, with its sprawling manufacturing centres churning out products at cheap prices.
The world’s second-largest economy seeks to reinforce this reputation by increasing efficiency and productivity across assembly lines. To do so, it is counting on a multitude of helping hands – those that belong to robots, which are more evolved versions of assembly-line machines from the 1990s. Chinese factories are increasingly relying on these smarter production assistants to boost output, and it appears they are on the right track.
Taking a firm grip
China’s dominance in the manufacturing sector has been apparent over the past decade, with its share to worldwide production peaking at 31 per cent in 2021, as seen in Graph 1. The country’s rise to the top has been rapid: just 20 years ago, China was contributing less than 10 per cent of manufactured goods overall.
In 2024, China and the US jointly accounted for half of global manufacturing value added, with India a far third at a 7 per cent share. Chinese factories remain the sole biggest supplier internationally, accounting for 28 per cent of global volumes, while the US provided a 23 per cent share. For scale, China supplies more goods than what the entire EU and Latin America can jointly produce yearly.
Manufacturing is a key pillar as it accounts for one-fourth of China’s GDP. Fulfilling the long-term goal set by the Chinese Communist Party to double the size of the economy by 2035 – enough to match or even overtake the US as the world’s biggest economic superpower – requires manufacturing growth to maintain a vigorous pace. Manufacturing value-added averaged 6.2 per cent in the first nine months of 2025, picking up from the previous year’s pace despite a drastic reduction in US exports amid a global trade war and some prevailing softness in domestic consumption. Clearly, there is even more room to expand once these concerns are addressed.
Labour substitute
Additional robotic arms and automated mechanical systems are particularly critical in supporting production at a time when China is facing a population decline, which has been the trend over the past three years. As China’s long-standing edge of abundant skilled labour onshore is under threat, increased reliance on robots appears to be the feasible alternative to humans working along the assembly line. Graph 2 shows that China is aggressively adding more robots for use in industrial settings. From a 27 per cent share in new industrial robots installed globally in 2015, China’s share surged to more than half of new installations by 2024, according to data from the International Federation of Robotics (IFR).
China’s operational factory robots have breached 2 million last year, with robot stock doubling from 2021 per IFR data. These robots are largely employed by facilities for electronics and vehicles production, which are among the country’s top exports. The IFR projects Chinese manufacturers to add more robots, growing at a pace of 10 per cent each year as more sectors adopt and expand usage. If these estimates are realised, China could end up raising their utilisation of factory robots from 54 per cent in 2024 to 58 per cent against total available units worldwide.
Japan and South Korea, both developed economies with aging populations, started using more factory robots much earlier but new installations have plateaued. This contrast illustrates China’s aggressive appetite in taking manufacturing automation to new heights.
Perhaps a testament to early gains from improved factory efficiency is China’s ongoing problem of a manufacturing surplus, which has depressed producer prices amid overproduction. Some players have resorted to slashing retail prices to exhaust their inventories, which has set the economy on a deflation spiral which authorities are now trying to reverse.
Made in China
China’s rising dependence on industrial robots also provides a push for domestic manufacturing. According to the IFR, more robots are now being sourced from domestic suppliers, meaning that factories in the Mainland are catching up with local demand for such. China relied more on foreign suppliers prior to 2024, and last year’s shift would support further industrial expansion.
Within the robotics space, China is also joining the global race for the mass production of humanoid robots – those that look and move more like people than metal. Rather than presenting a simple arm with multiple steel hinges, humanoid robots have faces and even “skin” and hair, so to speak. For comparison, a Chinese local startup appears on track to produce compact service robots for commercial release at a competitive price of USD 1,400, one-fourth of the USD 6,000 full-sized humanoid from a US manufacturer. Service robots envisioned as personal and household butlers are a different battlefield altogether but can potentially create new opportunities within China’s manufacturing sector.
Disruptions continue to shake up China’s industrial sector as prices remain low and amid persistent uncertainty over the US’ tariff war, but the rising importance of robots demonstrates how much room for growth exists for this segment. We at Lundgreen’s Capital maintain robust, well-considered positions in high-growth Chinese companies, and we see that the industry remains fast-growing and promising. Increased production efficiency with the use of advanced robotic aides in factories will translate to better returns, which bolsters our confidence towards the Chinese economy even further.
