Some China firms outsourcing to USA to cut costs

An article in the LA Times this week on businesses from China bargain-hunting on operational costs by outsourcing to the USA:
Liu Keli couldn't tell you much about South Carolina, not even where it is in the United States. It's as obscure to him as his home region, Shanxi province, is to most Americans.

But Liu is investing $10 million in the Palmetto State, building a printing-plate factory that will open this fall and hire 120 workers. His main aim is to tap the large American market, but when his finance staff penciled out the costs, he was stunned to learn how they compared with those in China.

Liu spent about $500,000 for seven acres in Spartanburg -- less than one-fourth what it would cost to buy the same amount of land in Dongguan, a city in southeast China where he runs three plants. U.S. electricity rates are about 75% lower, and in South Carolina, Liu doesn't have to put up with frequent blackouts.

Link (via neatorama, thanks Tian)


  1. Heh – someday, Chinese computer novices are going to be griping about always getting connected to tech support reps who barely speak any Chinese!

  2. @Razzabeth

    Isn’t this a good thing? It creates jobs in the United States instead of China. For goods that are to be sold in the US. So while profits will leave the US, there will still be money staying in the US in the form of wages, utilities, etc. $10 million worth that otherwise would be invested in China.

  3. I would hope that there is much investment going in both directions, as there is with Canada, UK, Germany, and any other major economy. It’s comparative advantage. It’s why I don’t make my own shoes from scratch, and why I hire a lawyer when I go to court. There are innumerable reasons why at any given time the people living in a given place are better at doing some things than other people are. It would be hard to completely understand why. Luckily, we have prices, which, in a relatively free society give a decent picture of those advantages, even when no single person could possibly know all the inputs empirically. The Chinese investor sees the lower cost, and that’s all he needs to know. Now, we will all be marginally better off because he has exercised the freedom to use their services.

  4. Yeah, but you can swim in the air and walk on the water there. How cool is that?

  5. next up… manufacturing moguls from Suzhou purchase Wilmington Delaware to develop the next ipod city to meet the demand of the growing Chinese youth market.

  6. Wow. Didn’t see that one coming. o_O

    As a child of the 80s growing up listening to my elders gripe endlessly about outsourcing to China, I’d travel to China sometime in the future just to hear some of the old folks there gripe about the cheap crap made in the USA. That would amuse me to no end. :D

  7. Well, with the dollar so weak it stands to reason that foreign firms would invest in the States. Our infrastructure is advanced and reliable, and is within one of the largest target markets in the entire world. This really isn’t that surprising. The question is, will it last? As US inflation builds up a head of steam (because the Fed is ignoring inflation to deal with the sub-prime fallout) it’s slowly going to penetrate to the rest of the worlds currency, and historically, people have turned to the dollar as inflation rises. And this might cause the dollar to increase it’s value again. At least thats my perspective.

  8. Woohoo!

    Except… won’t this mean that soon both Americans and Chinese will be griping about outsourcing while swimming through the air and walking on the water?

  9. It’ funny but cool, as well. since the US has been slowing it’s production and just buying stuff made everywhere else, it’s good to make stuff there as well.

    Looks to me that the chinese are crunching ALL the numbers instead of just looking at labour costs.

  10. Not terribly surprising. Haier is already building refrigerators in South Carolina. China could be the best thing to happen to the southeast in a long time–that’s a scary thought.

    Companies from other countries have been doing this for decades, too. If you want an American-made car, buy a Toyota–the cars are built in 13 different locations in North America, and the “Japanese” parts are likely to come from, well, there’s an Aisin plant just a few miles from here (yes, there are employers other than retail and the Federal penitentary in Marion, Illinois.) My dad has worked for a factory that is a joint venture between Yokohama and Continental Tire.

    There are manufacturing jobs here; sadly, what manufacturing is here is to get cheap outsourcing and to cut shipping costs.

  11. I knew it was only a matter of time before we’d start seeing some blowback. China couldn’t artificially hold down its currency forever.

    The reality of the modern globalized multinational is that they will scour the world for the cheapest way of producing things. (We have Wal-Mart to thank for pioneering that business model.) The short term effect of this has been the wholesale destruction of countless time-honoured industries in many developed countries, and the explosive growth of those same industries in poorer countries. The worst hit was manufacturing.

    The long term effects, however, remain to be seen. Industries historically have shifted like tides from one part of the world to another anyway, although this was previously mainly caused by wars and supplies of natural resources.

    The behaviour of multinational corporations, however, adds in local manufacturing costs as a factor in this equation. This could very easily lead to much more rapid shifting of industries, for better or worse.

    One potential upside to this is that it means we may not have to wait 50 years for our old industries to come back as countries’ economies begin to equalize under the pressure of market forces. The downside is that this could also mean we’re competing with the entire rest of the planet for jobs.

  12. *cough* So you’re telling me that land out in the middle of nowhere (Spartanburg?!) costs LESS than land in the middle of one of Guandong’s industrial centers? HOW CAN THAT BE?!?!

  13. There are really many countries outsourcing to US like India. It is also outsourcing to US because they save more money and there are lot of opportunity.If you know the deal in outsourcing, it will not be hard for you because you are familiar with the process.

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