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US firms returning

By Joseph Boris, Ariel Tung and Qiu Quanlin  (China Daily)

08:29, July 12, 2012

Companies, including General Electric, have defended their efforts in reshoring - moving work back to a company's country of origin - by citing a variety of factors.

These include lower energy costs in the US, largely due to discoveries of natural gas, that are helping to drive down operating and transportation expenses and labor-cost advantages caused by the narrowing wage gap between Chinese and US workers.

The steady appreciation of the yuan has also diminished the currency-exchange advantage that made China a hugely successful exporter.

With this latest twist in the global hunt for supply-chain efficiency, the expected increase in consumption among China's 1.37 billion people could provide a lucrative market for factories originally designed to produce goods for export to the US, an established practice known as offshoring, or offshore outsourcing.

Experts agree that one thing is certain, reshoring - sometimes also referred to as "onshoring" - must make financial sense, or a company won't even discuss it. Meanwhile, the calculations have to include the fate of manufacturing capacity in China, in which many companies have invested heavily.

"Today we see an economic situation where a strong case can be made for many products - that they should be made closer to the customers," said William Scheller, a professor of industrial engineering at Kettering University in Michigan.

GE's Chairman and CEO Jeffrey Immelt has led the industrial conglomerate's reshoring initiative. One notable example has been the addition of more than 1,000 jobs to GE's "lean manufacturing" site for large household appliances in Louisville, Kentucky. The company said offshoring has ceased to provide the cost savings that once justified overseas production of refrigerators and washing machines that were subsequently shipped to the US. GE also received tax breaks of $17 million from the state and local governments to entice it to add the jobs in Louisville.

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