For decades now China has been the obvious choice for manufacturers looking for cheap labor. Now, reports John Keilman in The Wall Street Journal, manufacturers are looking elsewhere. He writes:
Fears of military conflict and increasing security worries have some U.S. manufacturers re-evaluating their reliance on China.
Executives are plotting alternate supply chains or devising products that can be made elsewhere should China’s hundreds of thousands of factories become inaccessible. That prospect became more conceivable, they said, after the 2022 invasion of Ukraine prompted companies to sever ties with Russia, sometimes taking huge write-downs.
U.S. companies were further rattled after Chinese authorities recently questioned workers at Boston-based consulting firm Bain & Co. and raided the Beijing offices of Mintz Group, a due-diligence firm based in New York. The government has also barred major Chinese firms from buying products made by U.S. semiconductor company Micron Technology, citing national-security risks.
Foreign companies have had issues in China for years, but the growing tensions have unnerved businesses like Grey Duck Outdoor. The Minnesota-based watercraft maker contracts with Chinese factories to produce paddleboards, taking advantage of the country’s low costs and efficiency.
Owner Rob Bossen said all of his paddleboard suppliers, including companies that make foam, resins and injection-molded plastics, operate within a few miles of each other in the Shenzhen area. Bossen has good relations with his business partners, he said, but Russia’s invasion caused him to imagine what might happen if a similar disruption took place in China.
“There’s risk to having all your eggs in the China basket,” he said.
Companies like Grey Duck are in a bind, industry officials said. China’s access to raw materials and ability to produce components for finished goods remains unmatched, and its dense supplier networks have yet to be replicated elsewhere.
China accounts for 31% of global manufacturing, according to the United Nations Industrial Development Organization, nearly twice the 17% share of the U.S. It is also an important market for many U.S. companies.
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