Will the “Fourth Industrial Revolution” put China Inc out of business?

A story in today’s Wall Street Journal rehearses some facts that have been reported elsewhere (including in this essay on its own Op Ed page). But the key points of the article hold such important implications for China that they are worth considering carefully:

• In 2013, China overtook the United States to become the world’s largest market for industrial robots, according to the International Federation of Robotics. 
• In 2015, Chinese manufacturers bought 67,000 robots, about a quarter of global robot sales.
• China’s demand for industrial robots is projected to more than double to 150,000 robots per year by 2018.
• In May, Chinese home-appliance maker Midea Group launched a $5 billion takeover bid for Kuka, Germany’s most innovative engineering firm, and now owns about 86% of the company.

There’s a big debate raging among experts now about how artificial intelligence and advanced robotics — trends that, thanks to a big branding push by Klaus Schwab and the good folks at the World Economic Forum this January is now often referred to as “The Fourth Industrial Revolution” or “Industry 4.0” — will affect China. Will China, the “world’s factory,” be blindsided from these technologies? Or will it benefit from them?

Beijing’s cyber-protectionism

An extraordinary coalition of business federations from the United States, Europe and Japan teamed up this week to send Beijing a message: back off of proposed cyber-security regulations that would force foreign firms to store data in China and surrender information and technology to Chinese security inspectors.

The business groups, which included the US Chamber of Commerce, BusinessEurope and Japan’s Keidanren, decried the new rules in a letter sent to Chinese premier Li Keqiang. Other signatories included more than 40 global industry groups representing financial services, technology and manufacturing sectors, and business lobbies from Australia, Mexico and Switzerland.

The petition was a response to draft regulations, announced by the China Insurance Regulatory Commission last month, requiring foreign insurers to use Chinese hardware and software to store and encrypt data. But global firms also are fuming over new banking regulations that would require them to hand over key technologies such as source codes and encryption algorithms to the Chinese government. (Beijing has delayed implementing those rules after protest from Washington.)

China insists it needs tighter controls on cyber-security and the Internet to guard against terrorism. Global companies aren’t buying it. The letter casts the regulations as thinly disguised protectionism and warns they will further isolate China from the global digital economy. The new provisions would “have no additional security benefits but would impede economic growth and create barriers to entry for both foreign and Chinese companies,” the letter declares.