International Law

The Return of Manufacturing to the US -- Has China Had It?

Small companies, generally speaking, should not source product in China. Aside from logistical difficulties, they don't have the volume orders to command signficantly low price points nor even the quality control larger buyers can insist upon (and must fight to ensure is implemented). This Wired article on the subject is worth reading.

Rising labor costs do not present a major problem to manufacturers in China, even as they have risen over the past decade, because they comprise a minor percentage of product cost. The government-led tax incentives are the major drivers -- and the drooling (over an undersupplied consumer market not even nearly the size of the EU, but with the dreamlike possibility of "limitless growth "). Manufacturers may complain all they like, but quality concerns and theft of intellectual property have not moved them en masse out of China because they are making money in the short term.

Surely, the return of some manufacturing capacity to the US is not presently a trend of great significance. When Walmart starts sourcing its clothing in the mills of the Carolinas or when Pep Boys buy OEM replacement auto parts in Michigan -- that will be the sign of great change. And nothing like that is happening or looks like it will.

Full post as published by Asia Business Intelligence on March 04, 2011 (boomark / email).