As the global economy is concerned, manufacturing industry serves as the backbone of it. It serves as a fuel of each local economy in the West and Asia. Manufacturing is synonymous to China in Asia while on the other part of the globe manufacturing is defined by the United States of America both of which is leading the pack with United States chasing the tail of China and as the sleeping giant continues to be ignorant to what the latter could bring into the table, Will China still be the default option as US is finding its way to rise?
China was the default option for companies wishing to outsource production in order to lower cost. According to an article, “Since opening its doors to foreign investment and trade, China has offered a virtually unbeatable combination of seemingly limitless cheap labor (less than 1 dollar per hour), growing a pool of engineers, a fixed currency, and local governments willing to offer inexpensive land, free infrastructure, and generous financial incentives.” China dominated the Manufacturing industry because of these factors which they use as their competitive advantage against their bitter rivals United States. Those factors cited earlier won’t have any competitors who can fight side-by-side with them and because of that they gain the peak of the industry but now China’s manufacturing cost advantage is slowly shrinking as wages are starting to rise.
The U.S. is already becoming a lower-cost country. According to an article from Boston Consulting Group, “Wages have declined or are rising only moderately. The dollar is weakening. The workforce is becoming increasingly flexible. Productivity growth continues.” Now, United States has been awakened to sad reality that they are losing to China which triggered the greatest turnaround for United States to follow the trademark of China, which is going cheap. It seems like there’s a bigger possibility that cost advantage will shift to the U.S making it an attractive option for companies.
Is it enough that US is now a low-cost country compared to China? According to Boston Consulting Group, “When all costs are taken into account, certain U.S states…will turn out to be among the least expensive production sites in the industrialized world. As a result, we expect companies to begin building more capacity in the U.S. to supply North America.” Their moves and decisions are enough to regain investors, entrepreneurs and businessmen’s confidence over stability of their company if they will again invest at United States compared to their cheap investment at China.
The resurgence of U.S. will not diminish China’s role as a global manufacturing power. The manufacture of goods with relatively high labor content that are produced in high volumes will likely remain in China. More strategic decisions will have to be made when the times comes to consider where to build new manufacturing capacity to serve markets outside of China. According to Boston Consulting Group, “Our analysis suggests that the U.S. will become an increasingly attractive option…As long as it provides a favorable investment climate and flexible labor force, the U.S can look forward to a manufacturing renaissance.” Therefore, No matter how hard America tried to fill up their deficits they still can’t take the driver seat from China as the leading nation in manufacturing. Precisely because China has the momentum compared to America who recently regained their footing from their 2008 economic slowdown.
Co-writers: Medina, Justin Raphael M., Tan, Michael Jelo C.