Domestic companies in China which have fraudulently obtained vast amounts of subsidies from various local governments have allegedly overrun the mainland China’s growing robotics sector say industry insiders.

“The industry is now in a subsidies-driven bubble. It’s time to launch a nationwide campaign to investigate these companies which have received subsidies through deceit or illicit connections,” Wang Cairong, the executive director at the China Artificial Intelligence Robot Industry Alliance, told the South China Morning Post.

As the mainland’s vast manufacturing industry increased automation on the factory floor, it has been the world’s largest market for industrial robots since 2013.

According to estimates from the International Federation of Robotics, the total sales of industrial robots in the country were up 16 per cent from 2014 and reached 66,000 units last year.

Under a proposed five-year plan, the intention to infuse more capital into the mainland robotics industry was expressed by Chinese regulators in April. As a means to overcome labor shortages and spur innovation amid China’s slowing economy, these authorities have looked to robotics and automation.

However policies on subsidies to prop up robotics industry players in their jurisdiction ahead of that proposal have already been launched by various local governments at the provincial and city levels.

A big boom in the domestic robotics sector has been spurred by those generous subsidies.

According to data from the Ministry of Industry and Information Technology, from just a few hundred in the past few years, the number of robotics companies has swelled to more than 3,400. The companies include those that manufacture and service industrial robots, as well as provide automation integration solutions.

“Many robotics companies obtained subsidies by claiming they have key technologies on par with those of foreign competitors,” Wang said.

But without imported core components, the alliance has found production at certain domestic robotics firms to be hampered.

“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. Some have even formed several new companies to apply and receive one-off subsidies,” Wang said.

Direct subsidies to state-owned enterprises in their area have been the focus of local governments, said industry sources. The companies with guanxi or influential relationships which make deals possible are given priority.

Annual subsidies of several hundred million yuan to robotics companies, as well as tax deductions is provided by local governments, including those in developed provinces like Guangdong, Zhejiang and Jiangsu.

Many companies in the industry either lost money or were barely profitable, estimates Zhao Yong, the chief executive at robotics industry news portal robotschina .com.

The amount of industrial robots sold on the mainland last year totalled about 14 billion yuan (HK$16.52 billion), 85 per cent of which were imported, said Zhao in a report by news portal eeo.com.

“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 said.

A recent nationwide investigation launched by the Ministry of Finance on so-called “new energy vehicle” makers preceded his urgent call for a sweeping audit of subsidies to the domestic robotics industry.

(Adapted from CNBC)

Categories: Economy & Finance, Uncategorized