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Is a U.S.-China manufacturing shift on the horizon?

Chris Gerber, Associate Digital Editor - Powersports Business
August 30, 2012
Filed under From the Editors

The Sino(Chinese)-American trade deficit has tripled since 2000, continuing to grow compared to last year and according to a report on job losses done by the Economic Policy Institute, the U.S. lost an estimated 2.7 million jobs to China since it joined the World Trade Organization in 2001. And that’s a conservative estimate.

The brunt of these losses were felt in the U.S. manufacturing industry, and a significant portion of that among the motor vehicles and parts markets.

Both of these figures have fed into the already hungry American animus that has been increasingly upset with its trading partner. According to a Gallup poll, Iraq, Afghanistan and North Korea are closer friends with the U.S. than China. The number of Americans that believe China is our greatest enemy jumped to an 11-year high, sliding up from a tie with North Korea, 16 percent in 2011 to 23 percent in 2012. China was second only to Iran in the poll.

However, another poll released by Gallup around the same time found that while nearly a quarter of Americans see China as our greatest enemy, improved relations and more cooperation were popular desires of those polled. 71 percent said that a strong relationship with China was somewhat to very important, and two-thirds indicated that they would like to see more economic cooperation.

All are facts that haven’t gone unnoticed by the Chinese zeitgeist. China has taken notice of the attention ­— positive and negative — and talks over improved cooperation between the superpowers and between China and Western media could mean a big shift from current trends for manufacturing in the coming years.

Several recent articles in the English-language Chinese newspaper China Daily revealed that while the country is well aware of the bad name it has in the U.S., it doesn’t feel up to playing the villain. Tan Yingzi reported on the proactive efforts of State-Owned enterprises who sent delegates to the U.S. to hoping to figure out how to breach the rampart of American-foreign distrust. Representing Chinese interests in oil, chemicals, shipping and airways, delegates visited with the Washington Post’s newsroom, gathering four days of experience learning how to improve reputations through American media outlets.

State firms representing 117 Chinese enterprises met with Mary Jordan, the Washington Post’s Pulitzer Prize-winning journalist, who shared the importance of increasing disclosure with American journalists and improving access to information, suggesting as well that companies have a spokesperson for each State-Owned Enterprise dedicated to working directly with local media outlets and the American public.

Increased media coverage isn’t the only thing that Chinese manufacturers are doing in the U.S. Spreading the word about the New China, now as ally and partner rather than competitor or enemy, could help sales of Chinese manufactured products like ATVs and scooters through American distributors and resellers.

With funding from the U.S. government, Chinese manufacturers have been eyeing American soil as home for future operations. In fact, American labor is becoming so intriguing that Chinese investment in the U.S. is expected to reach record high in 2012, according to a report from the research firm Rhodium Group.

According to Hal Sirkin, senior partner and managing director for The Boston Consulting Group in Chicago, American manufacturers who had previously off-shored production have been looking back the U.S. favorably as the new, old hub.

In a recent post on the Huffington Post, Sirkin said that the U.S. is at the beginning of a manufacturing renaissance, driven by increasing costs of production in China, weak intellectual property protections, and the return of old-fashioned American productivity. All of these contribute to driving down the benefits that companies used to see in moving across the Pacific towards a cost advantage of 10 percent, which Sirkin says is low enough for companies to consider in shoring to save the hassle.

Chinese manufacturers are also feeling the growing importance of the “Made in the USA” label. As fears of China’s economic dominance grow inversely with a tepid American recovery, consumers more likely to be swayed by domestic products that could fuel America’s economic growth and come with a label that believe synonymous with high quality.

Several companies have already begun to take advantage of the U.S. government’s attempts to drive domestic manufacturing growth. A recent article in IndustryWeek focused on several Chinese manufacturers taking advantage of programs like the American Recovery and Reinvestment act, which are offering further benefits to companies that may be looking to escape from the problems and logistics of importing what they can be manufactured for nearly the same price domestically.

China’s investment in the rebirth of American manufacturing, as well as mended consumer attitudes towards Chinese-manufactured products, could help reinvigorate America’s industry base and heat up the cooling economic recovery.

Chris Gerber is the associate digital editor of Powersports Business and its sister publication Boating Industry, trade magazines for the powersports and boating industries. He manages the Powersports Business website and compiles and contributes to PSB’s twice weekly e-newsletter. Powersports Business is known for its exclusive national dealer surveys and in-depth industry analysis.

Contact: cgerber@goodsamfamily.com

Website: www.powersportsbusiness.com

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