Open Journal of Social Sciences, 2014, 2, 139-143
Published Online September 2014 in SciRes.
How to cite this paper: Zhao, W.B., Yan, H.Y. and Liu, H. (2014) Impacts of US Reindustrialization on Chinese Manufacturing.
Open Journal of Social Sciences, 2, 139-143.
Impacts of US Reindustrialization on
Chinese Manufacturing
Wenbin Zhao, Haiyan Yan, Hui Liu
The School of Management, Shanghai University of International Business and Economics, Shanghai, China
Received June 2014
The hollowing-out degree of American local manufacturing enterprises has reached a rather high
level due to the long-term off-shoring of the industries to other developing countries. Some U.S.
companies started to show intentions to move their manufacturing back homea strategy known
as “re-shoringsince 2010. The re-shoring behavior in U.S. manufacturing has triggered much
concern about U.S. Manufacturing Rebuilding. This article analyzes the key factors that may influ-
ence U.S. companiesre-shoring strategies. In the empirical part, regression formula is established
to evaluate those potential influence factors and verify their significance.
Reindustrialization, Influence, Manufacturing
1. Introduction
Since American president, Obama, formally sign US Manufacturing Enhancement Act in 2010, plenty of the
Fortune Global 500 companies, such as Intel, Ford, have started to move their overseas manufacturing factories
or offices back to the United States, whats more, also announced to the public that they would start to invest a
huge amount of capital on the mainland in order to respond to the call of the government and raise the employ-
ment rate. Thus, capital returning to America is starting to appear.
In 2011, BCG company released a report named as American Manufacturing Reindustrialization—Why?
This report mainly analyzed on the two kinds and tendencies of companies which will return to US. One is those
new hi-tech enterprises with high value-added and advanced technology, while the other is the labor-intensive
industries, which are likely to transfer from China to those developing countries with lower cost in the near fu-
From another point of view, the manufacturing reindustrialization to America can be proved by data collected
from Chinese Ministry of Commerce. In the data, obviously, the number of new US companies built in China
for investment is decreasing gradually in recent 3 years by the average 6% which evidently shows the interest of
US manufacturing on Chinese land has moved to other places. And the number of new enterprises created by all
the other countries also got a sharp decrease, reaching 10% in 2012. Though there may be some shortage on the
data and no ideas about how large the reindustrialization scale will be, it still can be seen that the foreign in-
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vestment is truly falling. I think Chinese manufacturing, which is experiencing the adjustment on the producing
policy, should attach importance to this potential phenomenon whether its a flash in the pan or the tip of the
iceberg. With the domestic industrial structures updating and the increasing impact from those lower-cost
emerging market like Vietnam or Malaysia, it is strongly urgent for China to change the order manufacturing
ways and prompt to concentrate on those high value-added and technology industries rather than the large
range’s repeated construction and production which lead to the previous cut-throat competition. So, attention
should be extremely paid to how much the US manufacturing reindustrialization influences on the domestic in-
2. Literature Review
When it comes to the research on the theory of multinational companiesdisinvestment, Michael E. Porter (1976)
mainly uses the industrial organization structure [1] to analyze the function. Boddewyn (1979) reverses the Ec-
lectic Theory of International Production led by Dunning to point out the three deciding thresholds of foreign
companiesdisinvesting [2] from the host country. Besides the companiesown subjective factor, Hamilton and
Chow (1993) also emphasize the influence of external environment [3] on disinvestment, such as macroeco-
nomic conditions, industriesgrowth situation and so on. McDermott (1994) classifies the different kinds of for-
eign enterpriseswithdrawing capital [4]. In his points, there exist two types of this behavior, offensive and de-
When researching on the degree of US manufacturing reindustrialization, Chen Xi (2012) emphasizes that
there actually exist many unknown situations and obstacles [5] even though the returning will create and bring
precious resources and new opportunities; Lu Yang (2013), however, points out that its not true [6] that Chinese
comprehensive labor cost has caught up with Britain or America though the domestic price really keeps sharp
increasing these years. In addition, the reindustrialization, in fact, is a kind of inverse globalization, so its be-
coming more and more difficult to completely accomplish it in a globalization environment. Other aspects, like
the influence of reindustrialization, Mi Jianwei and Chen Qiang (2012) think that the action will mainly affect
those Chinese industries [7], which own higher technology, by comparing the growth of foreign capital inflow in
the 7 main manufacturing industries of Chinese and America.
In conclusion, US manufacturing reindustrialization can be explained by the multinational corporationsdis-
investment on theory. Due to the short period of the phenomenon till now, not too many scholars choose this
behavior as their research direction, so there are no more systematic research results or theory on the influence
factors or the future expectation about reindustrialization.
3. Impact of Reindustrialization on Chinese Manufacturing
It occurs to be that Chinese manufacturing is likely to encounter the huge pressure on development in case the
reindustrialization keeps its sustainable growing. On one side, domestic industrial construction and economic
development make new technology requirements on the manufacturing which needs to accelerate the speed of
industrial structure upgrade. On the other side, the goods with high quality and low price from the international
market create a large strike on domestic market. Chinese producing industries will probably meet more difficul-
ties with the reindustrialization tendency.
3.1. Upgrade of Foreign Trade Friction
American has carried out a serious of policies to enlarge the export competition in order to meet the Ex-
port-Oriented Growth proposed by governments Reindustrialization plan, and this change is estimated to have a
great influence and challenge to Chinese manufacturing exports [8], especially to those middle and high quality
productions which are exported to American. According to the forecast from BCG Company, reindustrialization
will make American merchandise trade deficit get a dramatic decrease, even oils situation may have a change
because of the Shale Gas Evolution. Under the stricter and stricter trade protection policy in western countries,
many Chinese industries, such as fine chemistry, equipment manufacturing, vehicles, bio-pharmaceuticals, elec-
trical equipment and so on, have to face lots of furious trade frictions and disputes.
From the Vehicle Transportation in Table 1, trade surplus respectively reached 44.60%, 35.79% and 12.02%
in the 3 years. Obviously, the growth rate was in a decline, which means that the surplus is likely to be reversed
soon on some kinds of high quality production, from a certain extent. On the other hand, Chemical Engineering
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Table 1. Some Products’ Import and Export in 2008-2011 Unit: $100,000,000.
Year/Classification 2008 2009 2010 2011
706.97 397.54 600.91 429.47 888.74 655.95 1091.07 830.30
688.74 769.11 540.26 694.21 749.73 932.07 970.91 1179.62
Data collected from China Statistical Yearbook (E: Export I: Import).
is always a trade deficit, but it can be seen the rate is in a slowing phase in recent 3 years, reaching 91.56%,
18.44% and 14.47%. Related industries are making large efforts on this part of manufacturing, so the export
growth rate is declining in the recent 2 years, 39% and 30%.
Despite of the limited data collected, it is still evident that American reindustrialization really forms an influ-
ence on Chinese high-end manufacturing, as well as the productions exports.
3.2. Technical Commanding Heights Is Not Easy to Break
All the time, transfer of technology is an important mode of cooperation between China and transnational cor-
porations [9]. This mode promotes knowledge diffusion and technology spillover, helps foreign corporations get
desired production value, more important, makes Chinas related industries can learn overseas advanced tech-
nology and benefit from technology spillover. But after implementation of Americas reindustrialization stra-
tegic idea, rely on advantage and leading position in patents, standard, technology, intellectual property and so
on, America may establish technical barriers for Chinas manufacturer industry intentionally or unintentionally,
[10] which leads to sluggish of development and update of Chinas manufacturer industry.
As transfer of Made in China to Invent in China, China is at the key point of manufacture industrial transfor-
mation and update, should strive to develop advanced manufacture industry with high additional value (new
energy automobile, new energy material, aerospace manufacturing, electronic information, biological medicine,
advanced equipment manufacturing, etc.), reform and improve traditional basic manufacture industry. When
backwards transfer2 emerges from international market, advanced manufacture industry will go back to homel-
and of transnational corporations, which will prolong the time of Chinas related industries learn and develop
from foreign advanced technology to a great extent and take a toll on Chinas manufacture industry.
As can be seen from the data in Table 2, foreign corporations number of these four industries are reducing
gradually after 2009, and totality reduced by 17% in 2011. Of course this reduction cant be simply attributed to
moving back to homeland of American or global corporations, but it is undeniable that the reduction will affect
technology diffusion of high technology in China to a certain extent.
3.3. Gap of Innovation Competitiveness Is Increasing
According to related data, Chinas manufacture technology dependence on foreign technology is more than 50%,
which leads to obvious influence: As Chinas corporations have no ownership of key technologies, they have to
pay many percent of products price to foreign patent owners, such as 30% of computer price, 20% of cellphone,
20% to 40% of NC machine tool.
Compared to developed countries, the relative added value of Chinas research and development fee is far be-
hind. The rate of Chinas research and development fee to total output value is only 1.63%, which indicates that
China’s input on research and development fee is still too little. The implementation of Americas reindustriali-
zation strategy will be based on a new wave of technological revolution, and has four advantages: distribution
network is wide and reasonable, channel of information is unobstructed, trade is convenient, and market cir-
cumstances are friendly. These create market conditions for Americas revive industry plan and production re-
turn of manufacture industry, and also will bring challenge and influence definitely for Chinas manufacture in-
3.4. Industry Influence Analysis
Americas manufacture industry backflow began from 2010 around. As can be seen from the data in Table 3,
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Table 2. Business condition of foreign high technology industry (number of corporations).
Industry/Year 2008 2009 2010 2011
Total 5442 5487 5393 4434
Pharmaceutical manufacturing 704 692 696 559
Aerospace vehicle manufacturing 45 50 52 46
Electronic and
communication equipment 3387 3326 3243 2682
Electronic computer and
office equipment 550 525 498 427
Data source: clear up according to China high technology industry statistical yearbook 2012
Table 3. Comparison of foreign investment growth percent about 7 main manufacture industries in China and America in
Industry Foreign investment growth in America (%) America investment growth in China (%)
Food processing 5.7 15.7
Metallurgy 5.5 17.7
Machinery 0.1 38.1
Chemical industry 28.9 12.9
Electrical equipment 18.2 -31.5
IT electron 2.2 -13.5
Transportation facilities manufacture 2.3 36.7
Data source: US Commerce Department website
Americas chemical industry and electrical equipment that have high additional value get good graces of foreign
investment, the investment growth percent reached 28.9% and 18.2% respectively in 2011. Most of Americas
investment in China was in steady growth, except electrical equipment and IT electron that reduced a lot. Espe-
cially, investment of electrical equipment was reduced by one third; on the other hand, electrical equipment was
also the industry got foreign investment very much in America. So Chinas electrical equipment industry may be
impacted in future. It indicates that if America backflow continue to expand, industries like chemical industry,
electrical equipment and IT electron more likely being the leader.
As Chinas capability of independent innovation is very weak yet, development of electrical equipment man-
ufacture industry and other related industries only depend on terminal equipment industry chain [11]. But ter-
minal consumption equipment, such as PC and mobile phone, bear rising pressure from the customer demand
obviously for now, show up features with very fast updating and development without plan, which leads to a
dim view of integrated circuit industrys development. Take semiconductor manufacture in integrated circuit
industry as example, there are some big features like very high technology cohesion, fast products updating,
high production process requirements. Unfortunately, at this stage, at development direction of advanced tech-
nology and products, Chinese native corporations still have not enough strength to divide a piece of their own
market in high technology products area.
Therefore, if the large-scale backflow trend comes out true, the international technical research and develop-
ment corporations will delay the process of the newest technologies introduction to Chinas manufacture corpo-
rations. Especially for industries with high technology or high additional value, this influence will be more re-
4. Conclusions
Although the convenience offered by America government produced a lot of effects on pushing corporations
back to America to invest, cost pressure and market pull are the most important decisive factors in corporations
W. B. Zhao et al.
backflow decision about disinvestment from host country and investment back to America as corporations are
This paper referred to the distribution of Americas manufacture corporations in China, chosen communica-
tion equipment, computer and electronic products industries that include many America corporations, analyzed
the influence to Chinas manufacture corporations caused by foreign corporationsdisinvestment. Judging from
the whole manufacture industry, large-scale backflow of America manufacture corporations will have no influ-
ence on attracting foreign investment of Chinas manufacture industry and the advantage of China compared to
other developing countries in the short term, but will affect the Chinas long-term export to northern America.
Supported by New academic talents cultivation project for broad liberal-arts graduates in Shanghai local univer-
sities and colleges, the research achievement also belongs to the 085 Project of Universities in Shanghai
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