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MANUFACTURING

US push to bring factories home unlikely to hit China, experts say

China will dominate manufacturing even if some US firms take high-end work back onshore

PUBLISHED : Saturday, 08 December, 2012, 12:00am
UPDATED : Saturday, 08 December, 2012, 4:22am

High-end manufacturing may be starting to shift back from China to the United States, but China will remain a major manufacturing base for the foreseeable future, say industry players.

The US government would like to see American companies relocate manufacturing from nations such as China to the US and also encourage Chinese investments there, US Undersecretary of State Richard Hormats said in Hong Kong yesterday.

"We'd like to see companies that have invested abroad take another look at investing in the US," said Hormats.

In recent months, US local governments have been urging US investors with production bases in China to return to the US, said Stanley Lau Chin-ho, deputy chairman of the Federation of Hong Kong Industries.

"The US government is trying to tackle unemployment, so it is trying to convince manufacturers to return home," Lau said. "The local governments there are offering incentives for investments in manufacturing, such as tax breaks.

"The cost of production in China is rising. The government has tightened labour regulations. Everybody is expecting minimum wages to go higher. I can say many manufacturers will consider moving their production lines out of China to elsewhere in Asia and even to the US. [But] only a small number of manufacturers will move production to the US."

A Boston Consulting Group (BCG) report predicts that by around 2015, many products bought by US consumers will be able to be manufactured in the US as economically as in China.

As the central government keeps raising the minimum wage, savings rates from outsourcing production to China will drop to single digits for many products, said BCG.

On Thursday, Apple chief executive Tim Cook said the company would invest US$100 million to move some manufacturing back to the US starting next year. Taiwanese contract manufacturer Foxconn Technology Group, the major supplier to Apple and Hewlett-Packard, plans to expand its manufacturing in North America at the request of customers, reported Bloomberg.

Chinese personal computer maker Lenovo Group will also begin manufacturing in the US next year, reported The Wall Street Journal.

Apple's move is a "token gesture", said Geoffrey Crothall, a spokesman for China Labour Bulletin, a Hong Kong-based workers' rights group.

"Apple needs high-volume production," he said. "The US cannot do high-volume production the way China can. So a lot of Apple's manufacturing will remain in China."

Labour-intensive industries would retain much of their manufacturing in China, said Willie Fung Wai-yiu, chairman of Top Form International, a Hong Kong-listed bra maker.

"As far as my industry is concerned, I don't see production moving out of China to the US in the foreseeable future. Our trade is labour intensive," Fung said.

"Non-labour-intensive production can possibly move back to the US. The advantages of manufacturing in the US for the US market include shorter lead times and proximity to the market."

Top Form has moved some production to Southeast Asia.

China will continue to be a major low-cost export base for western Europe for many years because even in 2015, Chinese wages will be only be 38 per cent of western European salaries, according to BCG.

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