Factories in southern China, particularly in Guangdong province, are increasingly turning to automation as a solution to a shrinking labor force and rising wages. At DeRucci’s mattress factory in Dongguan, robots now perform many tasks that previously required hundreds of human workers, such as stitching and packaging, while a smaller group of employees manage areas where machines still fall short. This model of high automation is being adopted widely across the region, with company executives asserting that automation has not only compensated for the loss of cheap labor but has rendered low-cost labor less relevant to manufacturing competitiveness.

This shift is driven by demographic challenges including a historic low birthrate and a growing reluctance among younger workers to engage in factory jobs, despite broader unemployment concerns. Wages in China’s factories have risen substantially, surpassing those in countries like Indonesia, Vietnam, Bangladesh, and India, traditionally seen as lower-cost manufacturing alternatives. Rather than relocating operations to these countries, many Guangdong manufacturers argue that improved efficiencies through automation make continued production in China more cost-effective. For example, DeRucci’s Indonesian factory, despite having labor costs about one-third of those in China, cannot match the per-unit production costs of its highly automated Chinese facility.

The trend extends beyond furniture manufacturing to other industries as well. BYD, a leading electric vehicle manufacturer, produces over 1,000 cars daily on production lines that are about 98 percent automated. While automation at this scale is a global phenomenon, Chinese proponents highlight the speed and scale of adoption, much of which is supported by state policies. In March, the Chinese government issued an industrial roadmap emphasizing the integration of artificial intelligence and robotics across sectors as a strategic response to the nation’s demographic shifts.

According to data from the International Federation of Robotics, China installed nearly 295,000 industrial robots in 2024, accounting for more than half of all robots deployed worldwide that year. However, some analysts caution that automation’s role in maintaining China’s manufacturing competitiveness may be somewhat overstated. Bert Hofman, a former World Bank country director for China, notes that productivity gains and a competitive exchange rate have also been key factors in China’s sustained global market share, suggesting that wage pressures alone do not fully explain the country’s industrial resilience.

A significant part of China’s competitive edge lies in the dense industrial ecosystem of the Pearl River Delta, particularly around Guangdong and Shenzhen. This includes extensive networks of suppliers, engineers, research facilities such as the China Spallation Neutron Source, and electronics hubs like Shenzhen’s Huaqiangbei district, which hosts thousands of vendors supplying high-tech components. This ecosystem benefits from considerable state support, with estimates suggesting Chinese firms receive three to eight times more government assistance than many international competitors. While this support has underpinned recent market share gains, it has also drawn criticism and trade tensions from other countries.

Despite the push for automation, companies face challenges including legal restrictions on layoffs, the need to retrain displaced workers for more technical roles, and ongoing dependency on imported chips, particularly for AI systems. Some robotics firms remain unprofitable and struggle with duplicated research efforts, leading to calls within the industry for greater standardization to foster innovation and competitiveness. These internal constraints underscore the complexities in balancing rapid technological adoption with workforce and market realities in China’s evolving manufacturing landscape.