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Are Chinese Manufacturers Really Relocating to the US for Cheaper Production?

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China has been touting its “greater, faster, better, cheaper” production since the propaganda poster art days of the 50s, but all those things may not hold true anymore.

Twenty years ago—or even five years ago—it may have been unfathomable for a Chinese manufacturer to leave home and set up shop in the United States in order to improve profits, but that’s exactly what some are doing as costs in China continue to rise and demand for shorter lead times adds even more pressure to an already pressured market.

With wages in China climbing as much as 15 percent each year and the cost of shipping presenting both a financial and speed to market setback, the notion isn’t all that unfathomable at all, especially when automation eliminates a slew of human workers.

According to an article in The Wall Street Journal, Taiwan-owned shoe manufacturer Dongguan Winwin Industrial, which has its factory in southern China, is scouting U.S. locations to relocate its latest, high-tech machinery, and the winning venue will likely be near one of its major clients: Nike in Portland, Oregon or Skechers in California.

“Shoe and clothing makers were the first to flee the U.S. after China’s accession to the WTO, prompting a wage of outsourcing,” the Journal wrote. “Today, some are heading back to a country in the throes of a manufacturing renaissance, one that goes largely unacknowledged by a Trump White House obsessively focused on the trade deficit.”

Relations between China and the U.S. aren’t exactly warm and fuzzy at present as President Trump levies threats to right what he sees as trade wrongs with China, starting with a possible 45 percent blanket tax on goods from the Asian powerhouse. But if market conditions are naturally forcing the needle in favor of more U.S. manufacturing—whether Trump attributes this to his own efforts or not—it could be good for the sector, though perhaps not so great for jobs.

Dongguan Winwin can consider the move to the U.S. for cost savings because everything in the footwear factory will be highlight automated. Even though wages in the U.S. are still higher than in China, industrial land and energy costs are often lower, and without a whole lot of U.S. wages to pay in a factory that has fewer workers, not to mention a much lower bill for shipping, Dongguan Winwin could still come out ahead in America.

With an advanced injection-mold machine that makes soles and uppers, the factory needs only two operators where before it had 50 workers doing the same thing.

“My goal,” Glen Lin, vice general manager for Dongguan Winwin, told the Journal, “is to eliminate the two workers.”

Automation could make the factory Lin works for greater, faster, better and cheaper, with far fewer workers, a highly-technical process that keeps quality in check, and by eliminating the two-month shipping time to the U.S., which would have a profound impact on speed to market. This, it seems, could become the new normal in manufacturing.

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