Companies have been moving overseas for decades, looking to reduce costs and increase revenue by outsourcing production. And as China and India continue their rise to become global economic powers, the trend continues. But rather than American companies moving to India and China to save money, now Chinese corporations are looking at the United States as a land of opportunity and cost savings.
Yes, not Africa or Southeast Asia, though there are plenty of Chinese companies in those locations already, but America. And by Chinese standards, the Land of Lincoln is cheap.
Writing in Fortune, Sheridan Prasso explains that the gap between manufacturing costs in the United States and China is shrinking. “The land Yuncheng [a Chinese manufacturing company] purchased in Spartanburg, at US$350,000 for 6.5 acres, cost one-fourth the price of land back in Shanghai or Dongguan, a gritty city near Hong Kong where the company already runs three plants. Electricity is cheaper too: Yungcheng pays up to 14¢ per kilowatt-hour in China at peak usage, and just 4¢ in South Carolina. And no brownouts either, a sporadic problem in China. ”
While American workers may cost more, the infrastructure and land are cheaper and more reliable while the tax incentives are either equal to, or more advantageous than those found in China.
It’s not just Chinese manufacturing companies that are looking at the United States, stung by high unemployment, American cities are wooing Indian IT companies with tax credits and other incentives. They hope that Indian IT firms, in order to better compete with U. S. rivals like IBM and Accenture, will hire more Americans, thus creating more jobs.
Cincinnati, Dallas, Atlanta, Minneapolis and Tallahassee are actively courting top Indian IT companies like TCS, Infosys and Wipro to set up or expand their operations. Ohio Governor Ted Strickland gave US$19 million in tax credits to TCS to expand operations in Cincinnati, increasing the company’s head count from 300 to 1,000. Atlanta is encouraging Wipro Technologies, which now has 350 employees – nearly 300 of them Americans – to expand operation in the city.
The expansion of Chinese and Indian companies into the United States is yet another facet of the globalized economy. As these companies get bigger, they need to start thinking about global positioning, and more and more, they are seeing the United States as more than just a manufacturing or outsourcing center. Whether it’s Haier washing machines or Indian tech exports, the Made in USA label is helping these global brands compete in America and at home in India and China.
“Good products are borderless, ” says Li, the manager of Yuncheng, to Prasso.
This article was written by Christian Fleming for the blog, 2point6billion.com.The blog is contributed to by the experts at Dezan Shira & Associates, who maintain , India and Vietnam.