Offshoring to the United States

Offshoring and re-shoring have been staples of the U.S. manufacturing vocabulary for the past decade, but there hasn’t been a lot of discussion about other countries offshoring to the United States. Chinese conglomerates have begun to shift their production and manufacturing to the United States. The incentive is this: in China, companies that export products to the United States at ridiculously low prices are subject to anti-dumping tariffs because the U.S. believes that the products are being sold at a price lower than what it cost to make them, which creates an unfair advantage in the marketplace. If a Chinese company manufactures their product here in the United States, it is a domestic product and is not subject to the same regulations. Raymond Cheng, CEO of one Hong-Kong consulting firms, noted that “it’s a tactical advantage to be next door to your biggest client,” which is just what the Chinese companies are looking for. In addition to avoiding tariffs, opening a plant in the United States saves money on transportation and fuel. Cheng continued to point out that “it’s a natural evolution that as Chinese companies grow into global brands, they will come to the U.S., the largest consumer in the world.”

Chinese manufacturers have been launching U.S. facilities for the past five years, which has been a relief for some states that are desperate for revenue and jobs. The China-based Golden Dragon Precise Copper Tube Group Inc., the world’s largest producer of copper tubing (used in air conditioning, refrigeration, and automobiles), has begun work on a $100 million plant in Alabama. The facility is expected to create 300 jobs upon opening in 2014. The facility’s location is strategic, since Golden Dragon’s largest customer is Houston-based Goodman Manufacturing.

Daniel Rosen, a China expert and partner at Rhodium Group, cites past examples of overseas companies setting up shop in the United States. Specifically, Japanese companies in the 1980s – for some of the same reasons. “Today, there are more than 700,000 Americans working for Japanese affiliates in the United States.” Offshoring to the United States might be an unexpected move, but Chinese companies will be creating local jobs and saving themselves money.

Posted by: Devon Thorsell

Source: CNN Money

Photo credit Factory in Inner Mongolia courtesy of flickr user Bert van Dijk

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