US Companies Going Back to the U.S.?

When Europe was destroyed after World War II, U.S. companies  went and found cheap labor and markets and when the market matured, the jobs in Europe did not come back to the U.S. Ford stayed in Europe and did better and better. Other companies moved on to cheaper places but they did not go back. 

All Roads Leads to China had an article on Obama’s call to reshore jobs.   In it they note some reasons from Josh Noble in The Financial Times that those jobs will not go back to the U.S.

1). Skills. Many of the middle and senior managers in China’s factories have been working in production their whole lives.
2). Scale. Wages in some Chinese factories have already reached levels comparable to eastern Europe – in EU member states like Romania and Bulgaria. But none of those countries has the sheer weight of numbers required to build factories employing hundreds, thousands, or even tens of thousands, that southern China can offer.
3). Infrastructure. China’s ports, freight railways and airports – especially in the south – are as good as anywhere in the world.
4). Supply chains. After 30 years of manufacturing, most businesses have well established chain of supporting manufacturers. […] replicating those entire chains elsewhere in the world seems like an unlikely prospect.
5). Future customers.As the Chinese consumer spends more, Chinese factories will be much closer the their target audience.

I have recently written about Apple in China and noted the engineering talent and volume here in China.  This could also be added to his list. However, I think we need to consider more that China is becoming a better market. More investment will come and more ties will come as Chinese consumers start to have more money to buy things the U.S. might be making or bringing as a service. 

It is foolish to think that the U.S. will now reduce links in China now that they are mature enough to start to buy from us.  Apple surely is not planning to back away. Star Bucks will not go home. They will dig in farther as they will have a big market here. Exporting at arms length will never be as strong as having some presence here.

China will invest in the U.S. more over time and the U.S. and other developed countries will keep investing in China.   It will simply be more mutual, but reshoring will be a very small percentage of anything that happens. President Obama should seek better ways to help the U.S. than investing his energy here.  

What do you think?

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Posted in: China, Market Entry

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