With rapidly rising wages in China, critical shortages of skilled workers in many of China's lower-cost regions, and the higher productivity of U.S. workers, many companies are finding that it makes sense to manufacture goods for America in America.

So what should executives do? First, don't write off China as a highly desirable manufacturing location. While more goods sold in the U.S. will be "Made in the USA," China-as the largest and fastest-growing developing economy in the world, with a rapidly growing middle class and a population more than four times America's-will remain a top overseas market and a key manufacturing location.

Second, differentiate between product lines. Executives also need to understand that many products intended for the U.S. market should still be sourced from China. Products that require less labor and are created in modest volume-especially heavy expensive-to-shop products, such as household appliances and construction equipment-become strong candidates to shift to U.S. production.

Third, consider total cost. For many goods, China's cost advantage will shrink too much to bother with-and that's before taking into account the added expense, time, and complexity of long-distance management, logistics, and quality control.

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