The devaluation of the yuan, coupled with the plunge in China's stock markets, has raised questions about the nation's economic direction. For a while, China appeared to be well on the way to reshaping its economy, to focus less on exports and more on satisfying domestic demand. In line with that goal, Chinese leaders were willing to let factory wages rise to the point where it was becoming cheaper to manufacture some U.S.-bound goods in the western hemisphere, when all costs were factored in. At the same time, China began to experience labor shortages in its major industrial regions, further causing western merchandisers to rethink their sourcing strategies.

Years of success in serving as the world’s factory floor had helped China to develop the middle class that it needed to produce affordable goods for local consumption. But domestic demand has been slumping of late, slowing the grand plan. Once again, China is forced to rely on export growth to recharge its struggling economy.

Does that mean Chinese leaders will again take steps to make manufacturing competitive with the West? To a great extent, of course, it still is. China produces huge amounts of consumer goods for U.S. markets, and will continue to do so for the foreseeable future. But the work that left the country in recent years isn’t coming back. The nation’s labor shortage is real, triggered by the growing unwillingness of Chinese workers to take mind-numbing factory jobs.

Meanwhile, the reshoring trend is well underway. In a new sourcing survey by AlixPartners, questioning 248 manufacturing and distribution executives from North America and Western Europe, 32 percent of respondents had recently “near-shored” production or were in the process of doing so. For North American business leaders only, the number was 40 percent.

Among the North American sampling, 55 percent named the U.S. as their most attractive near-shoring destination, compared with 42 percent in last year’s survey. Mexico was second, at 31 percent, up from last year’s figure of 28 percent.

The survey also digs into reasons for the shift. Respondents consistently cited incentives offered by U.S. states, cities and community development corporations, says Foster Finley, managing director of AlixPartners. Lures included tax abatements, subsidized utilities, free worker training and access to old or abandoned buildings.

Manufacturers are also being drawn back to the U.S. by proximity to end markets and the opportunity to advertise their products as “Made in America,” Finley says.

Reshoring is an “established idea,” he adds. But rather than undertake a wholesale shift of production to the West, companies today are looking to balance global capacity. Many are retaining their presence in Asia, partly because low-value goods are still cheaper to make there, and partly because they see an opportunity to serve the Asian market, notwithstanding China’s current economic setback.

Just a few years ago, companies were hesitant to source production in Mexico, despite that country’s wage advantage over the U.S., due to a lack of efficient transportation options going north. Today, says Finley, the quality of Mexico’s intermodal and rail system is greatly improved, and border crossings are easier as well.

A new set of obstacles to manufacturing in Mexico has emerged, however. One is the difficulty of obtaining skilled labor in the country. Finley says Mexico is undergoing the transition experienced by producers in Asia 30 years ago – a gradual shift from the making of basic products to those with greater complexity, requiring higher levels of capital investment, equipment and worker skills.

That doesn’t appear to be a limiting factor in the U.S., says Finley. American wages might be relatively high, but they’re at least partially offset by local government incentives and the ability to train workers quickly.

Concerns over safety and security could also put the brakes on increased production in Mexico. Forty-two percent of North American respondents to the latest AlixPartners survey said they were expecting improvements in those areas. That compares with 55 percent in last year’s survey. Their growing worries help to explain why the share of respondents citing Mexico as their favorite destination for near-shoring dropped from 49 percent to 31 percent between 2012 and 2015.

AlixPartners did attempt to determine whether the devaluation of the yuan promises to make Mexico more or less attractive as an alternative to China. Taking multiple factors into account, it concluded that the impact wasn’t great enough to tip the scales back in China’s favor, Finley says.

In any case, near-shoring continues to offer bottom-line cost advantages over China for a number of products. Among North American respondents to this year’s AlixPartners survey, the average estimated savings was 8.5 percent, driven by lower prices for local raw materials, labor and plant overhead, as well as cheaper transportation and a lack of currency-exchange expense. That compares with savings of 6.4 percent in last year’s survey. Thirteen percent of respondents said they were expecting to save 20 percent or more, Finley notes.

The picture is liable to change quickly. Ratification of the controversial Trans-Pacific Partnership (TPP) could cause American manufacturers to seek production alternatives elsewhere in Asia. Or they might opt for other locales in the western hemisphere, such as South America and the Caribbean. Then there’s the ever-changing price and availability of energy to be considered.

If there’s any lesson to be derived from the AlixPartners survey, it’s this: When it comes to sourcing, there are no easy or permanent solutions to be found. As Finley puts it, “the world of manufacturing and supply chains is in constant flux, [and] there’s no substitute for deep, strategic, case-by-case analysis and tight project management.”

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