Trade war stalls China’s march of the robots

Trade war tensions have stalled the march of the robots in China.

As the fallout from the conflict enters a second year, the aftershocks have rippled through the world’s second-largest economy, threatening global growth.

The latest industry to be hit by the standoff between Washington and Beijing is the robotic sector, according to Xin Guobin, the vice-minister at the department of Industry and Information Technology.

“[Concerns about the] global trade environment, fears of a downtown in the world economy and the poor performance of China’s automakers – which use many of the country’s industrial robots – have led to predictions of lower growth and further industry reshuffle,” he said earlier this week, without going into detailed statistics.

“China’s industrial robot companies are still in the discovery stage, where risks and uncertainties in the sector prevail,” he added in an interview with the Caixin media group at the World Robot Conference in Beijing.

Anxieties have increased as the dispute between the United States and China risks plunging the world into a new economic Cold War.

Plummeted

Last week, the National Bureau of Statistics reported that Chinese factory output had plummeted in July to its lowest level in 17 years.

Retail sales have also suffered after rising just 7.6% in June as consumers started to feel the pinch, while sluggish imports were squeezed by the domestic downturn, exasperated by the Sino-US row.

“If the trade friction escalates further, it may eventually lead to a new Cold War,” the latest edition of China’s Economic Security Outlook, compiled by Liu Wei, the policy adviser for the People’s Bank of China, and Su Jian, a professor at Peking University, stated in April.

The omens are ominous. On Wednesday, the International Monetary Fund issued a stark assessment.

Gita Gopinath, the economic counselor and director of the research department at the IMF, and researchers Gustavo Adler and Luis Cubeddu, spelled out the dangers of tit-for-tat tariffs.

In a blog entitled Taming the Currency Hype, they highlighted the impact on “global growth” and the effect it will have on the “supply chain” and “business confidence.”

“Higher bilateral tariffs are unlikely to reduce aggregate trade imbalances, as they mainly divert trade to other countries,” Gopinath, Adler and Cubeddu said.

“Instead, they are likely to harm both domestic and global growth by sapping business confidence and investment, and disrupting global supply chains, while raising costs for producers and consumers,” they added.

Rhetoric

The IMF blog captured perfectly the polluted atmosphere hanging over the world’s two largest economies, poisoned by uncompromising rhetoric.

Moreover, another round of US tariffs on Chinese imports will kick in on September 1, despite President Donald Trump deferring duties on an array of products until after the Christmas holiday spending rush.

President Xi Jinping’s administration has threatened to “fight” fire with fire.

“Trade wars produce no winners. China does not want a trade war, but it is not afraid of one, and it will fight one if necessary,” Gao Feng, a spokesman for the Ministry of Commerce, said on Thursday.

“If the United States acts arbitrarily, China will have to take countermeasures. If the United States goes ahead wilfully, it will have a serious negative impact on US businesses and consumers,” he added.

Washington sanctions have already taken their toll on Huawei.

The poster child of China’s high-tech sector has a sprawling portfolio, which includes smartphones and 5G infrastructure, as well as research facilities into Artificial Intelligence, or AI, and robotics.

“The current trade war between the United States and China is not about trade,” Yukon Huang, a senior fellow at the Carnegie Endowment for International Peace and author of Cracking the China Conundrum: Why Conventional Economic Wisdom Is Wrong, said last year.

Stranglehold

“This war is about protecting the technological edge that has made the United States the world’s dominant economic power,” the former World Bank director for China added.

Still, in a move to break the stranglehold, China has unveiled a 2030 AI development plan worth 1 trillion yuan (US$147.9 billion) along with ambitious funding for robotics.

To put that into perspective, total spending on R&D in 2017 was 1.76 trillion yuan ($279 billion), a 14% jump compared to the previous year, Wan Gang, the Minister of Science and Technology, revealed in 2018.

“In the future, robots will no longer just be a tool to boost productivity but an advanced, smart assistant to humans, ushering in a new era of intelligent transformation,” Vice-Premier Liu Yandong said at a press briefing on Wednesday.

Until then, the march of the robots appears to have slowed to a crawl.

Read: “Made in China 2025” Series