The manufacturing hub for the electronics industry, Kunshan, in Jiangsu province, is seeking a drastic reduction in labour costs as it undergoes a makeover after an industrial explosion killed 146 people in 2014.
The county, one-seventh the size of neighboring Shanghai and the mainland's first county to achieve US$4,000 per capita income, was adjudged the best county for its economic performance by Forbes for seven years in a row.
However, the blaze, blamed on poor safety standards and haphazard industrialization, dented Kunshan's pride.
More than a year on, the county, which attracts much of its investment from Taiwan, is trying to reinvent its growth strategy. It is accelerating growth by replacing humans with robots and encouraging start-ups.
Thirty-five Taiwanese companies, including Apple’s supplier Foxconn, spent a total of 4 billion yuan (HK$4.74 billion) on artificial intelligence last year, according to the Kunshan government’s publicity department.
“The Foxconn factory has reduced its employee strength from 110,000 to 50,000, thanks to the introduction of robots. It has tasted success in reduction of labor costs,” said the department’s head Xu Yulian.
“More companies are likely to follow suit.”
As many as 600 major companies in Kunshan have similar plans, according to a government survey.
The job cuts do not augur well for Kunshan, which had a population of more than 2.5 million at the end of 2014, two-thirds of whom were migrant workers.
Factories and other buildings cover about 46 per cent of the land – a figure which is far higher than the cap set by the central government.
The local government, which was reshuffled after the blast, has promised to maintain zero growth in land development and decrease its population by 2020.
Kunshan’s latest growth figure is far from impressive.
The county grew by less than 3 per cent in 2014 and 2015 amid the central leadership’s bid to restructure the world’s second largest economy into a greener, more tech-intensive one.
Xu Xujiong, head of a local firm, Huaneng Welding, reflected on the hard times faced by the local units owing to the transition.
“Our profits dipped sharply over the past year,” he said.
The factory output, too, has declined.
At its peak, Kunshan manufactured 120 million laptops a year, but output had fallen to only 51 million because of falling demand, said local officials.
Smartphone manufacturing, however, is trying to bridge the gap – about 20 million units were made last year.
Kunshan is home to about 4,800 Taiwanese companies, which contribute over 60 per cent of its GDP, and the county is encouraging more people from across the strait to start businesses there to boost its economy.
He Rongrong, the director of Taiwan Investment Service Office, which is housed in Kunshan’s hi-tech industrial zone, said that the first factory built by a Taiwanese company in Kunshan was in 1989 and since then entrepreneurship had grown in leaps and bounds.
A business incubating center for young people both from the mainland and Taiwan was established last July to encourage more entrepreneurs, with 11 projects – 60 per cent of which were from the island – approved so far. Could this be a prediction of the workforce of the near future?
