News Center



Home News Center News

The Return of US Manufacturing & the Relocation of China's Industrial Chains

Dec 05-2025   



*This article is based on a lecture delivered by Deng Ziliang, Boya Young Scholar and Professor at PKU NSD.

The issue of US manufacturing reshoring has profound practical implications. Historically, the proportion of US manufacturing employment within non-agricultural jobs peaked at 30 % in 1944, subsequently declining steadily to 8%. Simultaneously, the proportion of manufacturing value added to US GDP has exhibited a long-term downward trajectory. Currently, China's manufacturing value added accounts for 32% of the global total, surpassing the combined share of the United States, Japan, Germany and South Korea. Meanwhile, America's contribution has fallen to around 16%. Since the early 21st century, the global trade landscape has undergone a fundamental transformation, with China's significance in global trade now markedly surpassing that of the United States: a trend that is highly unlikely to be reversed.

Conversely, the United States retains its leading position in manufacturing-innovation capabilities. Despite China's rapid industrial ascent, developing a stronger industrial base takes time. Notably, since the beginning of President Trump's second term, research expenditure at several US universities, including Harvard, has decreased significantly, with some laboratories closing. This may bring new changes to the future landscape of innovation.

In a narrow sense, industrial reshoring can be divided into two types. First, “relocation-type reshoring”, where companies move production lines from overseas back to their home country. Second, “outsourcing-type reshoring”, where companies shift procurement from overseas suppliers to domestic ones. More broadly defined, industrial reshoring encompasses three forms: first, “nearshoring”, which involves transferring production to neighbouring countries such as Mexico; second, “friendshoring”, meaning relocating supply chains to US allies such as Vietnam; and third, “foreign direct investment”, whereby foreign investors establish manufacturing facilities directly within the United States. Although the resurgence of US manufacturing has been most evident in high-end sectors, the high degree of automation involved limits its potential to create jobs for low-skilled workers.

Reshoring manufacturing inherently lacks economic viability, necessitating robust government industrial policies to drive it forward. Western nations criticize policy interventions implemented by Eastern countries such as China, yet simultaneously employ fiscal stimulus to actively promote domestic manufacturing reshoring.

The Trump administration's current fiscal stimulus primarily advances manufacturing reshoring through three avenues: first, reducing the tax burden on manufacturing enterprises further; second, incentivising the construction of new production facilities; and third, strengthening support for domestic R&D activities. Under the influence of US industrial policy, the behaviour of US-funded enterprises in China has become complex. In recent years, the number of subsidiaries operated by US firms in China has fluctuated markedly, with significant capital withdrawals and a polarization of business strategies. Moreover, over the past five years, R&D institutions of US-funded enterprises have accelerated their withdrawal from China, revealing a pronounced trend of technological decoupling. However, mutual patent citations between China and the US have continued to strengthen during this period, with a particular increase in the number of Chinese patents cited by US entities.

Against a backdrop of normalised geopolitical conflict and great-power rivalry, “risk avoidance” is emerging as a new driver of corporate overseas investment. A key direction for China's industrial-chain relocation is towards “connector nations” : shifting production capacity to countries such as Vietnam, Thailand, Mexico and Morocco. This essentially involves technologically advanced nations transferring manufacturing stages to other countries through corporate internationalisation. Given China's global influence in terms of exports of goods and outward direct investment, the overseas expansion of Chinese enterprises is both rational and inevitable.

In summary, sustained efforts by four consecutive US administrations have shown signs of recovery in America's mid-to-high-end manufacturing sector, a trend projected to persist for approximately five years. Historical trends suggest that China's industrial relocation is unavoidable. We should actively guide this process by formulating overseas-investment guidelines based on scientific principles to ensure its orderly progression. Leveraging the new dual-circulation development paradigm, we must empower Chinese enterprises to evolve into world-class, globally competitive corporations.

The Return of US Manufacturing & the Relocation of China's Industrial Chains

Dec 05-2025   



*This article is based on a lecture delivered by Deng Ziliang, Boya Young Scholar and Professor at PKU NSD.

The issue of US manufacturing reshoring has profound practical implications. Historically, the proportion of US manufacturing employment within non-agricultural jobs peaked at 30 % in 1944, subsequently declining steadily to 8%. Simultaneously, the proportion of manufacturing value added to US GDP has exhibited a long-term downward trajectory. Currently, China's manufacturing value added accounts for 32% of the global total, surpassing the combined share of the United States, Japan, Germany and South Korea. Meanwhile, America's contribution has fallen to around 16%. Since the early 21st century, the global trade landscape has undergone a fundamental transformation, with China's significance in global trade now markedly surpassing that of the United States: a trend that is highly unlikely to be reversed.

Conversely, the United States retains its leading position in manufacturing-innovation capabilities. Despite China's rapid industrial ascent, developing a stronger industrial base takes time. Notably, since the beginning of President Trump's second term, research expenditure at several US universities, including Harvard, has decreased significantly, with some laboratories closing. This may bring new changes to the future landscape of innovation.

In a narrow sense, industrial reshoring can be divided into two types. First, “relocation-type reshoring”, where companies move production lines from overseas back to their home country. Second, “outsourcing-type reshoring”, where companies shift procurement from overseas suppliers to domestic ones. More broadly defined, industrial reshoring encompasses three forms: first, “nearshoring”, which involves transferring production to neighbouring countries such as Mexico; second, “friendshoring”, meaning relocating supply chains to US allies such as Vietnam; and third, “foreign direct investment”, whereby foreign investors establish manufacturing facilities directly within the United States. Although the resurgence of US manufacturing has been most evident in high-end sectors, the high degree of automation involved limits its potential to create jobs for low-skilled workers.

Reshoring manufacturing inherently lacks economic viability, necessitating robust government industrial policies to drive it forward. Western nations criticize policy interventions implemented by Eastern countries such as China, yet simultaneously employ fiscal stimulus to actively promote domestic manufacturing reshoring.

The Trump administration's current fiscal stimulus primarily advances manufacturing reshoring through three avenues: first, reducing the tax burden on manufacturing enterprises further; second, incentivising the construction of new production facilities; and third, strengthening support for domestic R&D activities. Under the influence of US industrial policy, the behaviour of US-funded enterprises in China has become complex. In recent years, the number of subsidiaries operated by US firms in China has fluctuated markedly, with significant capital withdrawals and a polarization of business strategies. Moreover, over the past five years, R&D institutions of US-funded enterprises have accelerated their withdrawal from China, revealing a pronounced trend of technological decoupling. However, mutual patent citations between China and the US have continued to strengthen during this period, with a particular increase in the number of Chinese patents cited by US entities.

Against a backdrop of normalised geopolitical conflict and great-power rivalry, “risk avoidance” is emerging as a new driver of corporate overseas investment. A key direction for China's industrial-chain relocation is towards “connector nations” : shifting production capacity to countries such as Vietnam, Thailand, Mexico and Morocco. This essentially involves technologically advanced nations transferring manufacturing stages to other countries through corporate internationalisation. Given China's global influence in terms of exports of goods and outward direct investment, the overseas expansion of Chinese enterprises is both rational and inevitable.

In summary, sustained efforts by four consecutive US administrations have shown signs of recovery in America's mid-to-high-end manufacturing sector, a trend projected to persist for approximately five years. Historical trends suggest that China's industrial relocation is unavoidable. We should actively guide this process by formulating overseas-investment guidelines based on scientific principles to ensure its orderly progression. Leveraging the new dual-circulation development paradigm, we must empower Chinese enterprises to evolve into world-class, globally competitive corporations.