State of On-Shoring: Problem of China

Jim O'Reilly, Storage Engineer
EBN (4/14/2016)

When we discuss on shoring, the elephant in the room is always the People's Republic of China (PRC). China's economy is slowing fast enough to raise the issue of its future direction. The PRC has had a good run as a low-cost manufacturer with decent product quality, but labor costs have risen drastically over the last decade making the country vulnerable to re-sourcing decisions that take into account the logistics costs and risks associated with long pipelines.

From a nation-state perspective, China is a poor partner. Trade is very one-sided and, despite promises to open up, most companies find doing business in China very difficult. The state and party require large portions, usually a majority, of ownership to vest into their hands directly or indirectly, while treading through bureaucracy is a nightmare. In the long haul, China's success is unsustainable on this basis alone, especially with labor costs quadrupling in the last decade, bringing costs close to parity with low-wage areas in the US.

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