Executive Briefings

Advances in Automation, Wage Hikes in China Compel Manufacturers to Consider Returning to U.S.

Global supply chains will continue to expand in coming years, but at a slower pace than before, and in ways that follow different patterns, according to a report from Standard Chartered Bank.

Low-cost manufacturing, for example, is moving westward from coastal cities as wages rise, leading to more goods produced in inland China, India and other Asian nations, the report said. Yet over time, inland wages are likely to increase as well, creating opportunities for other emerging economies.

Increased automation and 3D printing could reduce the advantages of producing goods in developing countries with low labor costs if technology displaces a portion of the workforce.

"World trade growth has been weak recently and the expansion of (global supply chains) has lost momentum," the report's authors wrote. "Some of this slowdown is likely cyclical, but rising wages in China and new automation technologies are challenging the low-wage model, prompting companies to consider re-shoring, or bringing production home."

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Low-cost manufacturing, for example, is moving westward from coastal cities as wages rise, leading to more goods produced in inland China, India and other Asian nations, the report said. Yet over time, inland wages are likely to increase as well, creating opportunities for other emerging economies.

Increased automation and 3D printing could reduce the advantages of producing goods in developing countries with low labor costs if technology displaces a portion of the workforce.

"World trade growth has been weak recently and the expansion of (global supply chains) has lost momentum," the report's authors wrote. "Some of this slowdown is likely cyclical, but rising wages in China and new automation technologies are challenging the low-wage model, prompting companies to consider re-shoring, or bringing production home."

Read Full Article