Is Manufacturing Leaving China?

More jobs are coming to the United States from an unlikely source – China. Typically known more for competing with the United States for jobs, there has been a recent slurry of manufacturing leaving China headed for more profitable shores. It seems rising wages and fuel costs are driving the shift to a large extent. But there are other factors involved as well. Meanwhile, the US is on the receiving end of many of these manufacturing jobs, as the offshoring trend seems to be reversing.

Reshoring the New Norm?

In the 1990s, China was the destination of choice for manufacturers taking advantage of recent trade deals and low labor costs. But that’s all changing. Fuel prices have risen dramatically. Taxes have risen. And Chinese labor prices, are also rising.

But skills and a productivity? Well, they’re stationary or declining in the Asian country.

And now with tax reform in the air back in the US and the cost of skilled labor remaining low in southern neighbor and NAFTA partner, Mexico, things are turning around. Reshoring seems to be the new norm. As manufacturing leaving China looks for a new home, North America seems to be the recipient of many of those jobs.

Recent Cases of Manufacturing Leaving China

Some of the most notable recent announcements of large manufacturing operations fleeing China and headed to North America include:

• Fuyao Glass: In recent months, the company glass making company has decided to lower costs by investing over $1 billion in the United States. Lower taxes, affordable land, and simpler regulations were also motivating factors in their move to a former GM assembly plant in Moraine, OH. There, the company plans to hire 3,000 workers.
• Tianyuen Garments Co: The company recently purchased a massive fabrication plant in Arkansas and decided to invest $20 million into their new US operations. They plan to employ 400 workers in what will be the first Chinese clothing plant in the United States. The facility will produce clothes for popular brands like Adidas, Reebok, and Armani.
• Sun Paper Industry: Arkansas scored another win from China with Sun Paper Industry’s move from China to the US state. The paper products firm will invest $1 billion to create 250 new US jobs.

Why Is Manufacturing Leaving China?

The question is a complex one, but the typical cast of characters is certainly present. Taxes are increasing in China and decreasing in the US. Fuel prices make it increasingly difficult to transport products across the Pacific. And Chinese wages are catching up to US wages, while Chinese workers remain far less productive. But there is another trend resulting in manufacturing leaving China.

Automation also plays a role. As robotics and automated manufacturing technology advances, China is getting left behind. China’s manufacturing dominance was built on cheap labor, and that labor is increasingly obsolete. US robots work just as hard and efficiently as Chinese robots. So why would US firms ship their materials and products back and forth when they can automate production domestically? As manufacturing evolves to include more automation, it seems China’s competitive edge is slipping. The US can expect to receive not only many manufacturing jobs from China but also newly created jobs. These jobs will be created to service the growing robotics and programming industries that give us this automation capability.