Rising China Costs Drive Reshoring of European Manufacturing

After years of moving production to Asia, some European companies are following the example of their U.S. counterparts and coming home.

Decisions by the likes of Italian leather goods brand Piquadro SpA and battery maker FIAMM SpA to boost production at home do not mark a reversal of the “off-shoring” phenomenon that has shaped global business for two decades.

But companies are tiptoeing back to their home regions, driven by rising salaries in China that are eating away at the profit margins that once lured them abroad. They are weighing the still lower but climbing manufacturing costs abroad against the difficulty of overseeing production far from home, plus the cost and time taken to get goods to Western markets.

 
“Reshoring” is being led by clothing, footwear and electronics companies, partly because they are rediscovering the cachet of the “Made in Europe” label. But in Spain, for example, depressed wage levels since the euro zone crisis have also prompted foreign car firms to open production lines there.

A PricewaterhouseCoopers survey of 384 euro zone non-financial companies last month found almost 60 percent had reshored some operations, mainly production, over the past year, against 55 percent which had done the opposite. Italy topped the reshoring list with 44 companies, while Ireland, Germany and Spain also featured prominently.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza