The cost advantages of producing goods in China (or any other low-wage economy, such as India or Taiwan) will fall as wages rise. In theory this could lead manufacturers to reshore their production and jobs back to countries such as the UK and USA. A rise in the Chinese currency (renminbi) would accelerate this process.
In the USA, an influential pressure group has been formed called the Reshoring Initiative. The aim of this organisation is to bring manufacturing businesses and jobs back to the USA. One of its principal arguments is that businesses underestimate the total costs associated with producing goods in countries such as China. The group argues that manufacturers only use ‘rudimentary total cost models’ that typically underestimate the costs of offshoring by 20%.
Your organisation does not have access to this article.
Sign up today to give your students the edge they need to achieve their best grades with subject expertise
Subscribe
