Why Have U.S. Firms Offshored to China?

Abstract

This paper represents the first in a series on U.S. manufacturing offshoring. It describes why many U.S. firms have relocated production networks to China, the world’s largest manufacturing economy. As the U.S. economy has become increasingly dependent on the provision of services and the production of high-tech goods, many U.S. firms have offshored labor-intensive stages of their manufacturing process to China to benefit from cost differentials, operational advantages, better proximity to suppliers and a growing consumer base, and incentives. An accompanying briefing describes the size and composition of U.S. manufacturing offshoring to China.

Keywords: United States, China, manufacturing, manufacturing offshoring, offshoring, economy

JEL Classification: E00, F00