China's Rising Wages and the 'Made in USA' Revival

A technician prepares a VIPturbo Modem at the SRT Wireless satellite communications manufacturing plant in Davie, Florida on Aug. 18 Photograph by Mark Elias/Bloomberg

It wasn’t long ago that China was the cheapest place on earth to make just about anything. When China joined the World Trade Organization in 2001, the average hourly manufacturing wage in the Yangtze River Delta was 82¢ an hour. Oil was $20 a barrel, so no matter where you were ultimately selling your Chinese-made goods, it didn’t cost much to get it there.

China’s still cheap, but it’s nowhere near the deal it was just a few years ago. Workers in the Yangtze make almost $5 an hour today, and oil costs about $85 a barrel. Suddenly the benefits of making things in China aren’t so apparent, especially if you’re selling those things to consumers in the U.S. A new survey by Boston Consulting Group found that 16 percent of American manufacturing executives say they’re already bringing production back home from China. That’s up from 13 percent a year ago. Twenty percent said they would consider doing so in the near future.

American manufacturing’s increased competitiveness against China is a story that’s been told for a few years now, giving rise to the term “reshoring.” But it’s not just China that the U.S. is gaining against. For companies making goods for sale in the U.S., Mexico has long been the place to go—and that’s slipping, too. The BCG survey shows that the U.S. has passed Mexico as the place where companies are most likely to build a new plant to make things to sell in the U.S.

Within five years, U.S. executives also expect that nearly half their global manufacturing capacity will be located in the U.S., a big change from just a few years ago. While it’s a small sample size—252 senior execs at companies with at least $1 billion of sales—it’s telling of the change that’s under way.

Made in America is gaining ground
Boston Consulting Group

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