The China Law Blog came up with an article (China Manufacturing: “We’re Bringing It Back Home”) that gives a few examples of American companies repatriating their China activities:

We are working on shutting down a large American service company that has been in China for more than five years. The reason for closing is that “we never felt our Chinese employees were on board with our organization” and we would rather run everything from outside China.

We are working on extricating an American company from a manufacturing Joint Venture in China. The reasons are two-fold. One, the Chinese joint venture partner never cooperated and treated the joint venture like anything other than an extension of his own fiefdom and the cost savings just were not as great as expected, when productivity and quality problems were taken into account.

A manufacturing company that is shutting down all operations and “bringing it all back home.” Again, the cost savings were never as high as expected and the U.S. facilities are just “so much better and easier.”

In two of these examples, the Americans under-estimated China’s costs. So, is it really interesting to produce in China?

The key is to include ALL expenses in the calculation of the landed cost of the goods.

China has been very successful in attracting importers who focus on the FOB price. Many of them don’t even know how much they will have to pay for international freight or for import duties at the time of their first order.

After a bit of experience, these buyers include other costs in their calculations: trips to visit new factories, bank fees, QC inspections, express couriers, split shipments, and so on.

And what they often don’t compute is the “grey” dollars (by opposition to the green dollars that they can see and count). How much management time is wasted travelling to China and troubleshooting? What are quality and timing problems really costing the company? And what about being forced to finalize designs so long in advance?

I bet at least 20% of importers would do better to purchase domestically, or maybe from nearby countries, rather than in China. Repatriating production would force them to work differently, and maybe to target other customers (who value speed and quality).

Unfortunately, with the rush to source everything from China, entire industries have disappeared. Are you looking for a plush toy factory in Europe? Good luck…