The Fallacy of Re-shoring
June 04, 2012
Stories about re-shoring manufacturing to the U.S. are typically anecdotal and unsustainable in segments where there is cost competition. Besides, the statistics do not support the stories.
There is still far more manufacturing moving offshore than onshore. The U.S.-China trade deficit is nearly $300 Billion. There are approximately 120 million manufacturing jobs in China, to the U.S.’ declining 20 million. If the U.S. wants to rebuild manufacturing sector jobs, we have a long way to go to make that happen.
To re-attract and grow the manufacturing sector, the U.S. needs to develop Chinese-style economic incentives such as Special Economic Zones, build and improve the infrastructure, reduce taxes for manufacturers, and improve the focus on manufacturing engineering at the University level.
Most of the clients I work with now have a dual business strategy for China. Not only is it still a low cost manufacturing environment, but it is by far, the largest target market in the world. With the middle class in China growing at double digits and the Chinese government’s thirst for technology, the demand for all kinds of products is constantly increasing. Most companies locate manufacturing in China now to produce products for export as well as for the domestic Chinese market.
I have a client in the automotive sector, providing products and services to the global auto makers. This client is in the process of revising its operations in China to refocus its strategy on the burgeoning Chinese auto market. They have been in China for 20 years, but are experiencing an awakening to the new opportunities there. Demand for autos currently outstrips supply in China, with people on long waiting lists for cars and permits to drive in congested cities. This client is on the right track with a dual strategy of exporting to global markets and a renewed emphasis on the Chinese market.
Exporting from China and at the same time focusing on the growing Chinese market is what the best global companies are doing now. These dual strategies are a winning combination for the very competitive global future.
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