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It’s universally understood that it is cheaper to make things in China than in the U.S.
It’s one reason so much of what was once made by American workers is now made by Chinese workers.
But all of that is slowly changing.
In what’s been dubbed the American Industrial Renaissance, manufacturing activity in the U.S. is expected to make a comeback for several reasons.
Perhaps the most significant reason is accelerating wage growth in China.
You see, growth in China’s economy has been juiced for years by exports thanks all of that manufacturing. But that economic growth has come with a rising standard of living, and workers are demanding more pay.
And that rising wage is making it more expensive to make stuff in China.
On the other hand, the American manufacturing industry has found itself in an increasingly competitive position.
Check out this chart from Richard Bernstein Advisers.
“Manufacturing wages in China increased 18% per year over the 5 years from December 2007 through Dec. 2012, whereas US manufacturing wages rose 2.3% per year,” noted Rich Bernstein of Richard Bernstein Advisors.
“US manufacturing wage growth has not only lagged Chinese wage growth, it has lagged wage growth in much of the world,” he added. “US wage growth remains tepid particularly in comparison to countries in Asia and Latin America, whose comparative wage advantage continues to decline.”
“It remains unlikely that the United States will be the manufacturing powerhouse that it was during the 1950s and 1960s, but many factors are suggesting that the US industrial sector will continue to gain market share,” he said.