Advertisement
US-China trade war
China

US companies looking to return home from China face significant problems

  • The Trump administration wants to reduce American dependence on overseas supply lines by encouraging ‘reshoring’
  • But returning manufacturers often face old infrastructure, underdeveloped networks and poor labour pools

Reading Time:6 minutes
Why you can trust SCMP
Trump administration efforts to reduce dependence on overseas supply lines by encouraging ‘reshoring’ yield little result so far. Illustration: Lau Ka-kuen
Mark Magnier
As the United States awakens to its supply-chain vulnerabilities amid heightened pressure on companies to “reshore” from China, it is grappling with an uncomfortable truth: most will not end up relocating to the US. And, business experts say, the relatively few that do probably should not have left in the first place.
Advertisement

“Reshoring was just something nice, a nice idea, mostly for companies that should never have outsourced to a country like China,” said Renaud Anjoran, chief executive of Shenzhen-based Sofeast, which advises companies manufacturing in China and Vietnam. “Their total cost was not really that much lower, they didn’t save that much, they were not that labour-intensive.”

Accurate figures on reshoring are hard to come by. The Kearney Reshoring Index showed record shifts of US production from Asia in 2019, but this measures macroeconomic trends not individual jobs, companies or where they move to.

Another online “Reshoring Initiative”, which claims that “around 900,000” jobs returned to the US between 2010 and late 2019, relies on Google searches and does not factor in how many jobs were lost.

Patrick Van den Bossche, a Kearney partner who pioneered the Reshoring Index, said that companies often announce production shifts to the US, attracting headlines and official praise, without following through.

“There are these bold statements about bringing everything back from China,” said Van den Bossche. But all too often, 5,000 promised jobs are quietly scaled back to 500 even as deadlines stretch into years, he said. “Soup is never eaten as hot as it’s cooked. There’s a lot of blowhard stuff going on right now.”

Advertisement
That has not stopped the calls from Washington to “reshore” and “decouple” the world’s two largest economies, fuelled by Covid-19, the trade war and mounting US-China tensions.

The Defence and Commerce Departments are pressuring US companies to sharply reduce or end China sourcing and manufacturing; the State Department is working with Australia, India and Japan to reroute supply chains; and President Donald Trump signed an executive order in May directing the US International Development Finance Corporation – America’s development bank for emerging markets – to bolster US manufacturers.

Advertisement