Is there room for U.S. to benefit from change in China?
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This month's rapture having come and gone without incident, we move on to a rapturous prediction for our nation's beleaguered manufacturers.
A prophecy of their deliverance comes from a recent study by the Boston Consulting Group, a global business strategy consultant.
"We expect net labor costs for manufacturing in China and the U.S. to converge by around 2015. As a result of the changing economics, you're going to see a lot more products 'Made in the U.S.A.' in the next five years," said Boston Consulting senior partner Harold L. Sirkin.
Factors his conclusion is based on include: Chinese wages, which are rising about 17 percent each year; the inevitable rise in the value of China's currency, which will make Chinese exports more expensive; and higher inventory and shipping costs.
The scenario makes sense to Chris Kuehl, an economic analyst with the Fabricators & Manufacturers Association. He said the organization's 2,100 metal-bending members were already benefiting from China's diminishing cost advantage.
"They are getting business today that they did not get two or three years ago when they were losing to Chinese sourcing," Mr. Kuehl said. "It's considerably more of a level playing field than it may have been four or five years ago."
Not everyone believes that salvation is at hand.
Alan Tonelson of the U.S. Business and Industry Council characterized predictions of cost parity with China as somewhere between "over optimistic" and "wishful thinking." He said they ignored many factors that influence companies' decisions to invest in China or the United States. Labor costs are only one of them.
The council, which represents about 2,000 small and medium-size manufacturers, has been a vocal critic of China keeping the value of its currency artificially low, which eliminates U.S. jobs by making American exports more expensive. The council, labor unions and others said massive Chinese government subsidies also disadvantaged U.S. industry.
First Published May 29, 2011 12:00 am
