It’s tempting to look at China and other low-cost countries as an “either/or” proposition in terms of moving manufacturing there from the US. Some would like to see it as a black or white issue:

• Either companies can manufacture in low-cost countries like China more cheaply…
• Or, when they are no longer as cheap, companies stop manufacturing there.

The assumption that many people who see it this way would make is that companies would then bring back manufacturing to the US, once wages in countries like China increase.

It is not an “either/or” dilemma, however. There are many other factors to consider here.

Case in point – the best companies are moving operations to low-cost countries not only to save money, but also to enhance their opportunities to tap into the market of the country itself.

Yes, China does currently offer a low-cost manufacturing and sourcing opportunity, but the country itself also represents a rapidly growing market. Some smaller cities in China are seeing 30 percent market growth, and China’s GNP is rising. This growing market is a huge incentive for companies to manufacture in China and then sell in China.

This brings up the discussion of whether or not manufacturing operations that were moved to locations outside of the US will ever move back to the US. This isn’t bound to happen soon, and even if it somehow did, it would be a step backward.

Not only do the factories in the US no longer exist to return to, the low-paying, low-skill jobs that would come with them are not what the US needs. In my opinion, this scenario would represent returning to a lower standard of living in the US.

I found a recent report by the Federal Reserve Bank of San Francisco very interesting. The FRBSF’s research shows that more than half the amount that US consumers spend on products made in China actually stays here – going to American companies, workers, marketers, retailers, and transport providers.

So don’t fall into the trap of using assumptions and misconceptions about China – especially considering the opportunity that the country’s consumer market represents.

For more valuable information on this topic, check out this series of podcasts on Replacing China Myths with Facts.

Understanding Globalism in China

China’s Business Evolution

China’s Overall Evolution

More Resources

Caught Between the Tiger and the Dragon

Asia Supply Chain Excellence Report - August 2011

China Business Report: AmCham Shanghai & Technomic Asia Survey Shows U.S. Companies Thrive in China

Photo Credit: kiwinz