I. Introduction

Multinational companies (hereinafter the “MNC(s)”) operating their labor supply chains in China must determine if their business will benefit from China’s current push to robotize certain manufacturing industries by 2025.

Despite the huge challenges, countless manufacturers in China are planning to transform their production processes using robotics and automation at an unprecedented scale. In some ways, they don’t really have a choice. Human labor in China is no longer as cheap as it once was, especially compared with labor in rival manufacturing hubs growing quickly in Asia … [O]ne solution, many manufacturers—and government officials—believe, is to replace human workers with machines.

Over the coming decades, a labor shortage will force Western brands to remake their China operations or pack up and leave. The changes will mark a new chapter in the history of globalization, where automation is king, nearness to market is crucial and the lives of workers and consumers around the world are once again scrambled.

The intersection of digitalization and labor and employment laws raise issues that are both old and new. Labor unions and employees have dealt with the impacts of automation for generations. Now that comes in dynamic waves, however, with digitalization and robotization of the workplace. It is referred to as the fourth industrial revolution using the breakthrough technology of cyber physical systems. In Germany this revolution is led by the Government and called Industrie 4.0 and it “connects embedded system production technologies and smart production processes to pave the way to a new technological age which will radically transform industry and production value chains and business models (e.g. “smart factory”)”. In China, this government-led industrial revolution is called Made in China 2025. It is argued that the “challenge for China’s industry is that it is still in transition from Industry 2.0, which is mainly assembly lines, to Industry 3.0, which uses more industrial automation, electronics and IT”. To reduce this huge gap, [Made in China 2025] encompasses upgrading objectives for process management and logistics, R&D, intellectual property rights as well as technical standards.

The impact on the labor market and labor laws in China has not been addressed by this plan. “Unfortunately, within the grand vision of Made in China 2025, problems of work, training and workplace representation have been mostly omitted. Neither the Ministry of Labor [Human Resources] and Social Security [MOHRSS] nor the All China Federation of Trade Unions [ACFTU] participated in the drafting and related consultations.” Already in China, it is reported that Foxconn has replaced 60,000 workers with robots, likely causing other MNC global labor supply chain systems to consider making changes to reconfigure their use of labor.

The implications of digitalization on production systems, workers, and labor and employment laws are widespread and continually evolving. Besides increased efficiency bringing displacement of workers with attendant unemployment, there are the issues of collective bargaining, layoffs, privacy, discrimination, wage and hour, health and safety, workers compensation, and tort liability. Additionally there are questions whether robots can replace not only workers, but also middle management.

This article will examine how digitalization and robotization may affect the configuration and use of labor supply chains and the need for overseas cheap labor. Emphasis will be placed on China and its program of Made in China 2025 as well as its possible effects on foreign MNC labor supply chains and their workers under Chinese labor laws and including the “re-shoring” of MNCs, where they return to their home country using their own “cheap-labor-robots”. Tom Reuner, research vice president, intelligent automation, at HfS Research, stated “…companies won’t have to think any more about whether to offshore back-office processes to take advantage of cheaper labor. That’s because labor needs will be drastically reduced, and running a bot will cost the same — that is, not very much — everywhere.”

This article first introduced in Part I, the unfolding phenomena and significance of the fourth industrial revolution — global digitalization and robotization. Part II explains the implications of Made in China 2025 for foreign MNCs in the context of China’s declining economic situation with rising wages and a dwindling labor supply. Part III analyzes the likely impacts of Made in China 2025 on future structures of MNC labor supply chains and the issues arising under Chinese labor laws; and Part IV concludes.