Yes, most US-owned and other foreign-invested factories are still in China. This is despite all the press that reshoring, often described as moving back production to the US, has been getting.


Reshoring naysayers believe China is still the place to be.

For many companies, three factors stand out as their reasons for staying: strong vendor base, excellent infrastructure and skilled labor pool.

These advantages are not lost even to suppliers of high-value products such as consumer electronics, automotive parts, construction equipment and appliances, segments said to be the most ideal “reshorers.”

Founded in California’s Silicon Valley, Flextronics is among the makers listing these factors as China’s strengths. The electronics OEM provider’s headquarters are in Singapore. It was established in 1969.

Manufacturers agree that it is difficult to replicate China’s supply chain, with every material or component vendor within proximity of the assembly or manufacturing facility. This easy accessibility to inputs and consequent costs savings are particularly critical now, what with makers being pressured by narrowing margins and price competition.

An interviewee commented that margins are currently very tight. Companies would not be able to compete without minimizing costs as much as possible and China is at present the only option to get this done.

“I just do not see how Apple and GE could stay cost competitive if they moved production away from China,” an executive from the mobile electronics industry said in an e-mail. “Apple and GE may be making more of a PR move than an actual large-scale production shift back to the US.”

The American Global Health Group has three aloe plantations in Guangdong and Hainan provinces, covering about 500 acres altogether. “This setup makes materials procurement convenient,” said Ms. Ma, a merchandiser for the company. “American Global will not simply reshore and abandon its long-term investment.”

Skills top costs

For many China-based FIEs, worker sophistication continues to trump rising wages. The electronics industry, in particular, requires specialized skills. Many China electronics factories are already highly sophisticated and finding this level of expertise, specifically in PCB design layout, and Bluetooth and other wireless technology, in the US is very difficult and expensive.

Moreover, salaries in China are still significantly lower than in the US, despite the recent spate of wage adjustments. Trade observers said the last is the main driver for reshoring.

To illustrate, labor costs in the Pearl River Delta region, one of China’s traditional and largest manufacturing hubs, are roughly just one-tenth of what US workers make in an hour. This is despite the recent 10 percent increase in local labor rates. Factories in key cities within the PRD such as Shenzhen pay $2 per hour during the workweek and $3.10 on weekends and holidays. It is about $22 an hour in the US.

American Global holds on to these figures. In addition to its aloe farms, the company has a 20,000sqm production complex in Taishan, Guangdong, with close to 250 staff members. The plant was established in 2003.

Industry and financial analysts, however, advise makers to consider total costs and not just manufacturing wages when weighing reshoring pros and cons. In a report, the Boston Consulting Group said higher productivity, an increasingly flexible workforce and a resilient corporate sector in the US will help close out the wage gap between the country and China. BCG estimated that by 2015, hourly factory salaries in the US will be $26.06 and $4.41 in China.

Silk Road Associates cited logistics as another reason to stay in China. In “The end of ‘Made-in-China’?”, SRA said the ability to deliver rapidly and promptly helps global retailers manage inventory more efficiently, thereby lowering working capital costs. Unsold inventory, not factory wages, is one of the biggest costs for a retailer.

The report adds that mainland China’s total port container capacity, including Hong Kong, is bigger than the rest of emerging Asia. This allows mainland manufacturers to stay competitive against other low-cost regional production hubs. Cambodia, for example, may pay only one-third of factory wages in the mainland, but its container port capacity is just 80,000 TEUs. In contrast, the mainland boasts 145 million TEUs.

Made for China

Domestic interests also have a strong pull for many FIEs, which initially turned to China for export-oriented manufacturing.

The country is now a major market for American Global, forecast to account for 70 percent of sales of aloe-based cosmetic and skin care products.

Encouraged by growing domestic consumer spending, American Global “decreased US export share and raised the price of China products,” Ma said, resulting in positive sales and profit projections. American Global’s head office and international sales center are in Seattle, Washington. It was established in 1999.

China’s population of 1.3 billion is a big enough reason for Flextronics to stay put. A spokesperson said the company is “committed to operating in China where a billion consumers create a huge potential market.”

AmCham China has noticed this expanding China-centric orientation among FIEs participating in its annual Business Climate Survey.

Since 2010, the number of survey respondents with plans of producing goods in and for China has grown steadily. In 2012, two-thirds of AmCham China members selected this option, said communications director K.C. Swanson. “Most members view the China market as a long-term investment.”

Not quite there

While reshoring in China has admittedly gained strength over the past few years, the movement has yet to take of in full.

The trend, in fact, can still be considered at its infancy and progress from industry to industry is at different stages.

In a recent article on’s The Plain Dealer, Reshoring Initiative founder Harry Moser said the movement is “more than a trickle. But we’ll admit that it’s less than a torrent.”

The report goes on to discuss the factors hindering full-on reshoring: a lack of financing and a dormant supply chain.

Reshoring, however, will continue to accelerate. He Zhi Cheng, an economist at the Agricultural Bank of China, expects the movement will grow in the next two or three years.

“Made in America, Again”, Boston Consulting’s report foresees 2015 to be the turning point for reshoring. By then, producing goods for the US in the US will be as economical as making them in China.

Nevertheless, China’s position as a manufacturing central will remain, particularly for low-cost exports bound for Western Europe. Asia importers will likewise continue to flock to China when sourcing for labor-intensive products.