AI & Robots Transform China's Economy

China's AI Ascent: Reclaiming the 'World's Factory' Status Amidst Global Challenges

While Western tech giants like Sam Altman and Elon Musk often focus on grand, transformative applications for artificial intelligence, China is taking a more pragmatic, yet equally ambitious, approach. Its immediate priority is to solidify its position as the world's leading manufacturing hub, a status increasingly threatened by rising domestic costs and international tariffs. The strategy is clear: harness AI to produce goods faster, cheaper, and with fewer human workers.

This drive is evident across the country, supported by billions in government and private investment. Companies are revolutionising every stage of manufacturing and export, from design to logistics, transforming traditional factories into highly automated, intelligent operations.

The Rise of the 'Factory Brain' and Dark Factories

China's vision for manufacturing involves what executives describe as "living organism" factories. These facilities will increasingly think and act autonomously, moving beyond rigid, pre-programmed automation. This shift paves the way for "dark factories," where operations are so automated that they can run continuously with minimal or no human presence, often with the lights dimmed.

One prime example is Midea, a global home appliance manufacturer, which deploys robots under an AI "factory brain" in its Jingzhou plant. This central nervous system manages virtual agents that communicate to optimise tasks, relaying commands to robots and other machinery. Processes that once took 15 minutes are now completed in just 30 seconds.

"Only by proactively embracing change can we remain invincible in this revolution," remarked Hu Wangming, chairman of a major Chinese steel group, underscoring the national imperative.

The urgency stems from several factors. China's population is shrinking, younger generations are shying away from factory jobs, and global pushback against Chinese exports, including potential tariffs from figures like Donald Trump, is intensifying. AI offers a vital lifeline to counter these risks, ensuring China can maintain its manufacturing dominance.

Unprecedented Robot Adoption

The scale of China's automation push is staggering. Last year alone, China installed 295,000 industrial robots, nearly nine times more than the US and exceeding the rest of the world combined. Its operational robot stock surpassed two million in 2024, making it the highest globally. This rapid adoption is transforming productivity. Of 131 factories recognised by the World Economic Forum for productivity gains through advanced technologies like AI, a remarkable 45 are in mainland China, compared to just three in the US.

In Baosteel's "dark factory" in Shanghai, a handful of operators monitor dozens of screens, with AI dramatically reducing the need for human intervention. What previously required human oversight every three minutes now only needs it every half an hour. This efficiency boost is critical for a nation where manufacturing accounts for a quarter of its value-added GDP, significantly higher than the global average.

While some fear AI's potential to eliminate jobs, Chinese leaders are betting that the country's projected population decline of 200 million over the next three decades will offset factory job losses, leading to increased productivity without a rise in unemployment. China's Vice Minister of Industry and Information Technology, Zhang Yunming, has explicitly stated that embracing AI is "a necessary task and not an optional one."

Historically, China's economic rise was fuelled by a vast supply of cheap labour. However, average factory wages are now considerably higher than in countries like India, and young Chinese workers are increasingly reluctant to take on factory roles. Several years ago, Beijing projected a shortage of 30 million skilled manufacturing workers by this year. AI presents a solution to this demographic and labour challenge.

AI in Action: From Clothes to Cement

Beyond large-scale manufacturing, AI is transforming diverse industries. A clothing designer, for instance, has cut sample production time by over 70% using AI. In the port of Tianjin, one of China's largest, self-driving trucks handle shipping containers with minimal human presence, and AI optimises scheduling. Huawei, a company also active in developing large language models like Pangu, is deeply embedded in these transformations. Huawei's AI applications extend to various sectors, demonstrating a national commitment to AI integration.

Huawei engineers have worked with Conch Group, a major cement producer, to develop AI tools that predict clinker strength with over 85% accuracy, compared to 70% manually. This precision allows for better raw material management and has led to a 1% reduction in coal consumption, saving nearly $300,000 annually per production line. The company aims for a 2% cut by the end of 2026.

These projects highlight a key difference in AI adoption between China and the West. While the US is attempting to curb China's AI progress through export controls on advanced chips, the scale of China's ambition and its public's optimism about AI allow for rapid deployment. A survey found that 83% of Chinese respondents view AI-powered products and services as beneficial, double the rate in the US.

The Future of Ports: Automated and Efficient

China's port infrastructure is another area of significant AI investment. The port of Tianjin, in collaboration with Huawei, has deployed unmanned trucks and an AI system called OptVerse AI Solver. This system optimises millions of variables, from ship arrival times to crane capacity, drastically reducing planning time from 24 hours to just 10 minutes.

Moreover, the port launched PortGPT, an AI model also developed with Huawei, capable of analysing video and images to potentially replace human safety officers. With more than 88% of large container equipment already automated, Tianjin exemplifies China's technological leap.

This level of automation also highlights a significant difference in labour dynamics. Chinese companies face no independent labour unions, making it challenging for workers to oppose AI implementation. In contrast, the US has seen significant friction over port automation, with agreements like the one between the International Longshoremen’s Association and terminal operators prohibiting fully automated terminals until late 2030. This contrast underscores China's ability to implement AI strategies at scale without the same industrial relations hurdles.

The narrative from China's ports is clear: "We are the future." This unwavering belief, coupled with strategic investments and rapid deployment, positions China to maintain and even enhance its role as the world's factory, driven by the relentless march of artificial intelligence.

For more on AI's impact on employment, see our article on AI's Job Impact: UK Faces Steep Employment Decline. Asia to Follow?. You might also be interested in how AI is being used in other regions, for instance, the Singapore MSMEs Are Getting An AI Power-Up! and ASEAN: Regional AI Governance Overview.