In Volume 1 and Volume 2 of: ‘China’s Global Position: Offshoring and Reshoring for American Manufacturers’, we’ve indicated that offshoring trends in China have leveled off as more companies calculate “Total Cost of Ownership (TCO)” for their outsourced large scale facilities and production. Manufacturing executives are no longer as confident that outsourcing their operations to China are in their best interest.
Volume 3 of this series focusses on factors surrounding growing disenchantment with China and examines the reasons American manufacturing jobs are gaining slow traction.
In a survey conducted annually by the American Chamber of Commerce in China, 25% of 500 companies surveyed indicate that they intend to leave China in the near future, or are already in the process of leaving. Of those polled by AmChamChina, the most 4 most common reasons provided for businesses leaving China are as follows
- Many are seeing their businesses flatlining or are losing money outright.
- 77% of surveyed companies report feeling less welcome in China than they once did
- Nearly 80% surveyed said they have been negatively affected by China’s Internet censorship
- Inconsistent regulations and clear laws are making it difficult to conduct business.
Additionally, 52% of respondents report that the risk of IP leaks and data security threats are much greater in China than in other production locations. To read more on this subject go to: 2015AmChamChina.
While China loses popularity as an Offshoring destination; Vietnam, India, Thailand, and Mexico clamor in the wake to court American business production on foreign soil. Domestic manufacturing companies would highly benefit from using the “Total Cost of Ownership” tool, provided by RESHORE NOW at reshorenow.org This tool aids businesses in the decision whether to continue outsourcing production to other countries, or to return production back to the United States. Many executives are surprised to find that streamlining their processes locally can increase operational efficiency, create jobs at home and boost the US economy.
While the US employs Free Trade Agreements that make it profitable for businesses to operate over seas (Trans-Pacific Partnership TTP, North American Free Trade Agreement NAFTA, etc), the economy of the US will not see a drastic economic rise from businesses leaving China. Consequently, manufacturing jobs in America gain only a small increase margin as a slow trickle of businesses make the decision to move production back to the USA instead of outsourcing to other countries.
In Volume 4 of this series, we will revisit China’s Devaluation of the Yuan and check in with Global Markets.