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China outsourcing more manufacturing to the US

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China’s manufacturing investment in the US is increasing sharply, with factors such as cheap energy and incentives cited as reasons.

According to consultants Rhodium Group, Chinese investment in manufacturing in the US was worth $US 400 million between 2011 and 2013. So far this year it China has spent $2 billion.

The South China Morning Post reports that the shale gas boom in the US had increased its attractiveness to investors.

Meanwhile, in China, competitiveness has been hampered by slow productivity growth, exchange rates and increasingly expensive energy.

A report by Boston Consulting Group has found China only enjoys a 4 per cent cost advantage over the US.

"Due to the narrowing gap of cost of labour between the US and China, there is a quiet trend bringing back some manufacturing to the US,” Squire and Sanders law firm partner James Hsu told South China Morning Post.

Hsu also mentioned local governments welcoming Chinese investment with incentives.

"We have seen US companies requiring Chinese suppliers to set up manufacturing facilities in the US to better meet their needs," he said.

Image: AFP/Getty Images

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