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According to a new report by The Boston Consulting Group, by 2015 wage inflation and a stronger yuan will force industries that have moved to China to come back to the U.S.That could mean 2 to 3 million more jobs for the country, a lowered trade deficit (by 25-30%) and about $100 billion in output.
They’re calling it China’s “tipping point,” when the cost advantage of manufacturing some goods made for sale in North America is simply too high to be profitable. It will most effect sectors where goods are heavy, and logistics and shipping take up a higher portion of production costs than wages.
BCG estimates that in the next five years, wages in China's industrial heartland will rise 18%, and reach about 25% of what Americans make in the southern US.
At the same time, worker productivity will increase at only half the rate of wages. That means productivity adjusted costs will rise.
By 2015, labour adjusted for productivity will cost $15.03 an hour in China's most productive region (the Yangtze River Delta)
And even if Chinese companies automate, if labour costs are around 20% or below, that won't help much.
China's workforce is 58% more that all of Southeast Asia and India's workforces combined, so not all of the manufacturing that leaves China will go there.