Domestic Consumption is Still the Biggest Problem for Chinese Advanced Manufacturing

At China’s inaugural National Advanced Manufacturing Conference (NAMC) that was held last month, Chinese President Xi Jinping asserted that China aims to use advanced manufacturing to “enhance the autonomy and controllability” of China’s industrial ecosystems. There’s no reason to think that China won’t succeed at that goal.

But in trying to achieve that objective, China may in fact only hinder its ability to solve the real problem with its economy: domestic consumer spending. Chinese consumers account for slightly under 40 percent of Chinese GDP, near the bottom in global economic rankings and far below the global average of 60 percent. For comparison’s sake, American consumers account for 68 percent of US GDP, while in the next largest East Asian economy, Japan, domestic consumption represents around 53 percent of economic activity.

China has yet to discover how to balance its industrial output with its domestic needs, although in its most recent Five-Year Plan (the 15th), the State Council for the first time included a dedicated ‘special plan’ for raising domestic consumption. The Chinese government has set a target of 60 trillion yuan ($8.8 trillion) for 2030, representing 20 percent growth from the 50 trillion yuan Chinese consumers spent in 2025 (the first time they hit the 50 trillion yuan mark). However, given that China aims to grow its economy by an annual rate of around 4.2 percent through 2035, even if China hits the 60 trillion yuan target, that would mean that domestic consumption would actually be growing at a slightly lower rate than the economy at-large.

Going back to what I said about China’s advanced manufacturing goals standing in the way of its domestic consumption goals: this is a fairly straightforward macroeconomic conundrum. The more China automates, the worse its job market gets, resulting in less disposable income to go around.

Guangdong province, on the nation’s southeastern coast, exemplifies this dynamic. It’s the most populated province in China and, in 2025, led all Chinese provinces in manufacturing revenue. It just set a target of producing 80,000 humanoid robots in 2028, which at first sounds like a preposterous number given that all of China produced somewhere between 13,000 and 16,000 in 2025 (roughly 97 percent of global humanoid production). But the Chinese government has said that it expects to produce over 100,000 nationally this year, so that rate of scaling doesn’t seem impossible. On the other hand, as I’ve discussed, the US intends to ban new imports of Chinese robots by January 1, 2028, which, in addition to presenting an excellent opportunity for the US additive manufacturing (AM) industry, also raises the question of where all of China’s humanoids are going to end up.

That, in turn, presents a bunch of different possibilities. Arguably the best-case scenario would simply be for China to not make quite so many robots. The likelihood of particularly volatile demand fluctuation is one of the reasons I think AM is such a perfect fit for the robotics market, and especially for humanoids: if you can shift to primarily on-demand production, then overcapacity resulting from weaker-than-anticipated demand and the regulatory uncertainty surrounding exports becomes more manageable.

Also, a great deal depends upon what the robots will be used for. Everyone seems to suggest that humanoids are still quite bad at industrial tasks, but I would never bet against China’s ability to force a technological achievement into existence. Again, though, that creates the even bigger problem of taking jobs away from the workers whose disposable income you’re relying on to grow domestic consumption.

Still another possibility is that, for some time to come, China’s humanoids will continue to do mostly the kinds of things they’ve been doing, like dancing and so forth. Perhaps, along those lines, they will evolve more in that direction and people will start to accept them as a form of human companionship. That is in many ways a depressing thought, but it would at least align with China’s goal of raising consumption spending specifically in the services markets, where the nation’s economy is the weakest. Here, I’m thinking of things like exercise for the elderly, which, as far as human/humanoid interaction goes, seems to me a relatively non-dystopian use-case. Plus, it would leave more workers in place to make the robots with proven industrial technologies, above all metal AM.

To me, any valid solution to the problem essentially boils down to something like that. China needs to use its smart manufacturing strategy, centered on AM, to train more higher-value workers, so it can nest its other goals—most importantly, in this context, humanoid output—within its strategy for growing domestic retail services markets.

If you think this is solely China’s problem, it’s actually everyone’s. The weakness of Chinese domestic consumption is the main reason why China can’t stop flooding every other market with cheap exports. So, if Chinese smartphone manufacturers are representing larger shares of the Chinese market, everyone outside of China should in fact welcome that, so long as they also welcome more reshoring of manufacturing to non-Chinese economies.

The same thing with chips. No one should fear China making better chips; they should only fear other nations not being able to keep pace with China’s rate of progress. Aside from the fact that the way many Westerners get when they speak about China is off-putting to most everyone else, it’s counterproductive. All evidence suggests that every time you approach these sorts of challenges with restrictiveness, it backfires. As I noted in my post about the NMAC, it was precisely the US banning of Huawei in the first Trump administration that has led to China’s chip progress ever since.

This and other similar responses are all merely ways of deflecting away from the real source of most macroeconomic difficulties, no matter what country we’re concerned with, which is that if your economy lacks adequately-paying jobs then you hinder growth. The AM industry could be a very valuable asset in combating this problem from multiple directions, but it is still far too small, far too uninterested in long-term thinking, and frankly far too beholden to interests that are completely outside the realms of consumer spending to deal with those problems effectively.

Nevertheless, it is by no means too late for this to change, and there’s not even need for more government involvement than already exists in order for it to happen. We just need companies with genuine strategic vision to rise to the occasion. Attract the best workers by paying more than your competition, commit to training them continually, and differentiate yourself by making products of sufficient quality to get customers to pay more. In practice, these are admittedly extremely difficult tasks, but the AM industry has the advantage of already inclining in this general direction, anyhow. And if strategic vision is what stands in the way of China’s growth or economic growth anywhere else, then we should question how much all of the individuals claiming to be innovators were truly suited to the task they signed up for.

Featured image courtesy of BLT