The Return of Manufacturing to the US
it possible that manufacturing may leave China
and return to the US? This may be wishful thinking, but there are
signs that we may be moving down that path.
Consider the following from an AP
article that appeared on many news outlets recently:
- Labor costs in China
are increasing 15% per year since 2008.
Workers are demanding better wages and working conditions due to a
labor contract law that made them more aware of their rights
- Tax preferences for foreign
companies expired in 2007
- Beijing decided to stop tethering the yuan to the US
dollar. This allows it to
appreciate and increase costs in yuan.
- Other costs are rising
including land, water, energy and shipping costs
for Chinese workers are still a fraction of the wages for American workers, but
studies show that the overall cost advantage of manufacturing in China is
shrinking. Many companies are responding
by moving factories to cheaper areas farther inland or to other developing
countries, such as Vietnam, Indonesia or Cambodia. In some cases, companies are shifting production
back to the US. Wham-O has brought half of its Frisbee
production to the US. Publishers may follow suit. A book that costs 48 cents to produce in China and ship to the US
costs 68 cents to produce in the US.
If costs in China go
up by half, it will be about the same price as in the US and one could eliminate the 30
days needed for shipping.
the standard of living in other parts of the world rise, the cost advantage of
manufacturing outside of the US
decreases. Eventually we will see
manufacturing return to the US,
but I don’t know if I will be around long enough to see it.
08-04-2010 12:56 PM