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China manufacturing: "We're bringing it back home."

By Dan Harris in 'China Law Blog'

I know many of our posts of late have been fairly negative on China, and I really wish this one were not, but I really have no choice but to "call 'em like I see 'em" We are constantly writing articles on what country is going to be the "next China" and I have mostly been talking up Vietnam as that choice. See, for instance, the following posts:

I had a revelation today. The United States is the Next China. How could I have missed it?

There are many articles out today on how manufacturing jumped unexpectedly in both the United States (and in England) and most attribute that to a rising economy. I agree, but I also think/know that at least some of that is due to American companies choosing to expand their manufacturing in the United States (as opposed to China) or simply shutting down their operations in China.

Here is what we have been working on JUST THIS YEAR:

  • We are working on shutting down a large American service company that has been in China for more than five years. The reason for closing is that "we never felt our Chinese employees were on board with our organization" and we would rather run everything from outside China.
  • We are working on extricating an American company from a manufacturing Joint Venture in China. The reasons are two-fold. One, the Chinese joint venture partner never cooperated and treated the joint venture like anything other than an extension of his own fiefdom and the cost savings just were not as great as expected, when productivity and quality problems were taken into account.
  • A manufacturing company that is shutting down all operations and "bringing it all back home." Again, the cost savings were never as high as expected and the U.S. facilities are just "so much better and easier."

I am not saying that every company is going to be closing down their China operations and going home, because that is certainly not going to be the case. Indeed, on the flip side, we are getting a ton of work from companies seeking to tap China's consumer and B2B market. We also are getting a steady flow of companies seeking to make low to mid range goods in China. Where I see the "return home" phenomenon most likely to occur is in difficult to manufacture goods where the U.S. company has existing U.S. operations so closing down China will not involve building a new factory anywhere else, but simply hiring back already-trained, already-skilled workers.

This is a new thing and so I am dying to know what you are seeing out there?

Dan Harris is founder of the Harris & Moure law firm, a boutique international law firm focusing on small and medium sized businesses that operate internationally. China is the fastest growing area for the firm. Dan writes as a source of China legal and business information.

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