Chinese current events and U.S. manufacturing

My co-worker Tim Heston stole a little of my thunder for this week's blog post with his coverage of China's decision to adopt a more flexible approach to how it values its currency. U.S. manufacturers have been clamoring for years for some shift away from China's currency manipulation, but to no avail. The Chinese don't like to be told what to do. If it weren't for the fact that they really were forced to make the move to stave off the rising costs of imports, Chinese government officials would still be turning deaf ears to the world's concerns.

Despite Mr. Heston's coverage, he didn't address all of the news emanating from China. In fact, other happenings there may have  more of an impact on U.S. manufacturing than the recent currency decision.

Apparently, Chinese workers are tired of toiling under slave-like conditions in manufacturing plants. Could China's cheap labor of today be the less competitive labor force of tomorrow?

Multiple suicides at a Chinese electronics contract manufacturing complex, which employs more than 300,000 people, caught the eye of the world and the attention of OEMs such as Apple and Nintendo. Strikes at Toyota's and Honda's Chinese plants took those companies by surprise and led to some concessions. Maybe someone got them a bootleg copy of "Norma Rae"?

These events aren't going to convince multinational companies to pull their factories out of China; the market is too big to ignore, and China is still an advantageous place to manufacturer thanks to its abundant supply of labor and favorable government policies. However, it may cause other companies to rethink outsourcing to China because no business leader likes the surprises and obstacles associated with labor unrest. Nothing can upset a just-in-time supply chain like a wildcat strike at a factory on another continent.

In the meantime, U.S. companies are still wringing productivity improvements from its workers, with output rising 4 percent for the first quarter of 2010 and hours rising only 1.1 percent.  Manufacturing in the U.S. rather than seeking dollar savings overseas is looking to be a smarter decision every day.

The folks at the National Tooling and Machining Association and Precision Metalforming Association see this as a real "reshoring" trend. They are promoting reshoring events to match up metal fabricators and formers with OEMs looking to solidfy their domestic supply chains.

For those who may consider this an example of celebrating the misfortune of others, think again. This is an example of celebrating changes that everyone predicted, but never seemed ready to occur. China is on the slow path to emerging as a modern nation with modern problems. The country's leadership is going to have to start governing, not just lording over people. That spells a long-term success for Chinese workers and an immediate shot in the arm for U.S. manufacturers who have felt that Chinese companies have been unfair competitors in this global economy.