Subsidy Fraud in China’s Robotics Industry Hides Manufacturers’ Struggle to Innovate
Kagan Pittman posted on May 31, 2016 |
Chinese manufacturers create fake companies and purchase cheap robots to cash in on subsidies.
A factory worker tests robot arms at a plant belonging to Zhejiang EverRobot Robotics Co., Ltd. in Jiaxing, China. (Image courtesy Shen Zhicheng / Imaginechina via AP)
A factory worker tests robot arms at a plant belonging to Zhejiang EverRobot Robotics Co., Ltd. in Jiaxing, China. (Image courtesy Shen Zhicheng / Imaginechina via AP)

China is making moves to modernize its manufacturing industry, but in incentivising local manufacturers with generous subsidies, corrupt businessmen are coming out of the woodwork for easy cash-grabs.

Earlier this year, China released its “Made in China 2025” (MiC2025) economic policy, modeled after Germany’s “Industry 4.0” plan. The policy lays out incentives for domestic manufacturers to create and utilize intelligent and advanced manufacturing technology in an effort to keep up with Western advancement, based on a quality over quantity philosophy.

In 2015 alone, manufacturers in the Chinese mainland purchased 66,000 industrial robots, according to the International Federation of Robotics. That’s a 16-percent increase from 2014.

Chinese regulators are hoping to inject more money into the robotics industry under a proposed five-year plan, according to the South China Morning Post (SCMP).

“It has been an open secret within the industry that many Chinese robotics firms, including some companies that are listed, have cheated to obtain subsidies,” Wang Cairong, executive director at the China Artificial Intelligence Robot Industry Alliance was quoted as saying to the SCMP.

“Some have even formed several new companies to apply for and receive one-off subsidies,” Cairong continued. “It’s time to launch a nation-wide campaign to investigate these companies which have received subsidies through deceit or illicit connections.”

Corruption in China’s Robotics Industry

Even before the MiC2025 policy was published, many city- and provincial-level governments saw it coming and began releasing subsidies as well as tax deductions for the benefit of robotics developers, servicers and integrators.

SCMP reports that according to the Chinese Ministry of Industry and Information Technology, the number of such companies increased to over 3,400 from only a few hundred in the past few years.

An industry source, known to SCMP, stated that local governments have been known to direct subsidies to state-owned enterprises in their area. These deals were made possible through “influential relationships.”

Despite the influx of cash, robotics developers failed—or possibly didn’t even try—to develop unique and efficient domestic products.

SCMP reports that investigations conducted by the Alliance found production at certain domestic robotics firms would be hampered without imported core components.

Additionally, SCMP quotes Zhao Yong, chief executive at Robots China, as having estimated that many robotics manufacturers were losing money or barely profitable. Yong further stated that 85 percent of the 14 billion yuan (USD$2.1 billion) in robotics sales were from imported products.

Chinese Manufacturers Utilize Low End Robots to Cash in on Subsidies

Chinese mainland media have also reported that local manufacturers have been installing cheap, low-end industrial robots on assembly lines of known labor-intensive factories to qualify and capitalize from local government subsidies.

The robots are then left unused.

“There remains a big shortage of specialists who can assess the true situation in the country’s robotics industry and determine arbitrary decision-making by local governments in granting subsidies,” Wang was quoted as saying.

If China wants its manufacturing industry to achieve the goals outlined in its MiC2025 policy, it’s going to have to address the corruption that’s currently holding Chinese manufacturers back from truly innovating.

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