Trend reversal: China begins to offshore manufacturing work to the U.S.

April 24, 2012

In a move that signifies a massive change in the manufacturing industry, Chinese conglomerates have begun to move their operations to the U.S. in an attempt to expand their global footprint and avoid "anti-dumping" tariffs, CNN reported.

According to the news outlet, the U.S. is welcoming this move by Chinese companies, as states across the country are eager to reap the benefits of increased revenue and the creation of jobs. This transition has occurred as many American businesses reshore their manufacturing work.

Thilo Hanemann, research director at Rhodium Group, a New York-based economic advisory group, noted that many Chinese manufacturers have launched their own American facilities in the last five years. The move has been especially popular in sectors where products have been slapped with strict anti-dumping tariffs.

This adjustment of manufacturing strategy has been due, in part, to the fact that the U.S. imposes financial penalties on imported products believed to be sold for less than it costs to produce them, also known as "dumping."

Raymond Cheng, chief executive officer of Hong Kong-based consulting firm Sozo Group, noted that he is working with more than 30 large Chinese manufacturers that want to increase their presence in the U.S.

"For many of these companies, their biggest customers are in the United States," Cheng said. "It's a tactical advantage to be next door to your biggest client." He noted that this trend is similar to what occurred when Japanese businesses moved operations to the U.S. in the 1980s.

The creation of new manufacturing jobs in the U.S., through increased Chinese investment, is occurring at a time when there is a dearth of qualified talent in the sector.

A recent study released by the World Economic Forum and Deloitte Touche Tohmatsu Limited highlighted how there could be up to 10 million manufacturing positions that have gone unfilled. This shortage remains despite the high unemployment rates across the globe, and growth in the sector may be inhibited by this skills gap.

"In the race to future prosperity, nothing will matter more than talent," said Craig Giffi, Vice Chairman and Consumer & Industrial Products Industry Leader at Deloitte LLP in the United States, who helped author the report. "The skills gap that exists today will not likely close in the near future, which means companies and countries that can attract, develop and retain the highest skilled talent – from scientists, researchers and engineers to technicians and skilled production workers – will come out on top."