A Rising Factory Tide in US and China Won’t Lift All Boats

A rewiring of the world’s factory supply chain is taking hold as companies contend with sharpened geopolitical fissures, a new era for industrial policy and an increased focus on resiliency. But this revamping is happening against a backdrop of uncertain economic conditions and a surge in the cost of the capital needed to fund such investment. Small and medium-sized manufacturers in the US and China are particularly vulnerable to these growing, divergent pressures and are at risk of becoming collateral damage.

The factory renaissance in North America is real: Melius Research has tabulated some $380 billion of “mega-projects” — defined as an investment greater than $1 billion — with almost 60% of those planned facilities already breaking ground. There’s more to come with a huge influx of US government stimulus aimed at infrastructure, clean energy and semiconductors still filtering its way down to specific projects. China, meanwhile, is pushing billions of dollars of infrastructure investment as companies seek to support a domestic recovery after the end of Covid-Zero policies while grappling with slowing overseas demand and weak balance sheets.