U.S. manufacturers are regaining some of their global competitiveness, primarily driven by a weak dollar and wage inflation in countries long-considered to be more cost-efficient locales, according to a study by AlixPartners LLP http://www.alixpartners.com, a global business-advisory firm.  The analysis shows that Mexico remains the leading low-cost country (LCC) for manufacturing outsourcing from the U.S., but that a number of developing countries—with the exception of China—are gaining ground on Mexico as attractive options.

The gap between the U.S. and each of the other 12 countries has narrowed—the first time this has happened since 2007.

The most recent data show that China took a step back because of its rapid wage inflation and a stronger yuan vis-à-vis the U.S. dollar. This year’s index also revealed that Vietnam, Russia, and India have closed the cost gap considerably and have surpassed China in terms of their cost-effectiveness.

According to AlixPartners, this trend is likely to continue and could gain steam as China becomes a more economically developed nation and confronts challenges that go hand-in-hand with economic maturity.  Specifically, the study predicts that China will face wage inflation, a growing unionization movement, and a modicum of labor unrest as workers push for wages and benefits on par with those earned in the U.S. and other developed economies.