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Reshoring of Some Chinese Manufacturing Jobs Becoming Likely As Cost Gap is Expected to Shrink to Just 16 Percent Next Year

June 1, 2012 Comments off
The tide has begun to turn on the flow of manufacturing jobs from the U.S. to China and other low-cost countries, according to a new study from The Hackett Group, Inc. (NASDAQ: HCKT). Some companies are already reshoring a portion of their manufacturing capacity, and this trend is expected to reach a crucial tipping point over the next two to three years, as the total landed cost gap between the two nations continues to shrink, driven in part by rising wage inflation in China and continued productivity improvements in the U.S.
At the moment, China remains a manufacturing powerhouse, with nearly 75 percent of the companies surveyed having some manufacturing capability in China for at least three years, either directly or through contract manufacturers. The Hackett Group estimates that Chinese manufactured exports to the U.S. currently support between 15 and 20 million jobs in China.
The Hackett Group’s study offered significant hope for the U.S. jobs market. The study found that companies are exploring reshoring as an option for nearly 20 percent of their offshore manufacturing capacity between 2012 and 2014. This repatriated capacity could roughly offset the jobs that will otherwise move offshore, indicating that the great migration of manufacturing offshore over the past several decades is stabilizing.
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