Will China’s ‘winds of change’ alter U.S. manufacturing sector?

China and US flagsBig changes are taking place in China, but will those changes have any impact on the decision of U.S. manufacturers to leave that country or to continue to operate there? That was a question I asked Mark Bonifacio, President of Bonifacio Consulting Services (Boston). He has been traveling to China’s manufacturing regions, visiting plants (mostly medical) for more than 12 years. He shared some insights with PlasticsToday.

One of the recent changes that may have some impact on China’s global market participation is the election of Xi Jinping as President and Chairman of the Communist Party for life, following in Mao’s footsteps. “It was a high likelihood that this would take place,” said Bonifacio. “More than anything, I think he’s trying to avoid a vote that might show any weaknesses in his governing. I think that, in the short term, this will have very little impact on the manufacturing landscape.”

China finished 2017 with GDP growth of 6.8%, the largest in seven years, and a per capita GDP of $8,436. China is the world’s largest economy by purchasing parity, and, according to the International Monetary Fund, the country is a key driver of the global economy.

Can China balance its political system with its participation in a free-market global economy? The news media is rife with articles about China’s crackdown on rules for foreign companies investing in China, and even a strict application of laws on its own people.

While most multinational companies are aware of this dynamic, they will say they made a big miscalculation, said Bonifacio. “The U.S. thought China would move toward democracy—a long-term bet that didn’t pan out,” he stated. “We don’t see anything in the near term that would affect that in any way.”

With respect to changes in China affecting reshoring, Bonifacio noted that he is seeing some of that. “Yes, there is an uptick in U.S. manufacturing, and it is strong. But we need to build the next generation of toolmakers if we’re going to remain competitive. I’ve talked to tool shops in the United States, and they can’t find talent. As we get this resurgence [of companies reshoring], we need to fill the skills gap. China is still the mold-building capital of the world.

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