I think this is a trend worth keeping in mind as China’s average wages continue to increase for the foreseeable future. As this study reports, even a modest rise in Chinese wages will likely result in numerous U.S. manufacturers returning to the U.S.
CHICAGO, May 5, 2011—Within the next five years, the United States is expected to experience a manufacturing renaissance as the wage gap with China shrinks and certain U.S. states become some of the cheapest locations for manufacturing in the developed world, according to a new analysis by The Boston Consulting Group (BCG).
With Chinese wages rising at about 17 percent per year and the value of the yuan continuing to increase, the gap between U.S. and Chinese wages is narrowing rapidly. Meanwhile, flexible work rules and a host of government incentives are making many states—including Mississippi, South Carolina, and Alabama—increasingly competitive as low-cost bases for supplying the U.S. market.
If this report is accurate, expect trade relations between the U.S. and China to change substantially as the U.S. will rely more on China as a consumer of its goods rather than as a manufacturing center. The report also argues that China’s future as a manufacturing center will be secure for the time being, however, because of continued investment by European and Japanese companies.