Firms heading home as benefits wane in China

Incentives cut back

China, meanwhile, is slowly reducing incentives to attract foreign direct investment. Changes in the value of the yuan, dollar and other currencies are having an impact as well.

"In the past, the Chinese government used many favorable policies to attract FDI, but as Chinese companies close the technological gap, it is winding these down.

"This is going to continue, and foreign multinationals find it quite frustrating,"said Xu. "They're also not receiving the kind of policy incentives that local companies are getting.”

Small companies are part of the offshoring trend, too.

In April, the president of Quality Float Works Inc, a Chicago company that makes hollow float metal balls, told ABC Radio Australia that his experiment with outsourcing to China had proven to be a mistake due to faulty materials, delivery delays and the changing economic landscape.

"It started out being a very positive experience. We were able to save a lot of money, but unfortunately it went downhill,"Jason Speer said. "It became a nightmare. It ended up costing us money overall, because all the time and money that we wasted in trying to check everything ... (we) ended up just having to buy it again.”

Boston Consulting Group, which has published papers on reshoring in recent years, predicts that ongoing trends could "virtually close the price gap"for most products sold in the US by 2015.

"Within five years, the total cost of production for many products will be only about 10 to 15 percent less in Chinese coastal cities than in some parts of the US where factories are likely to be built,"BCG wrote in 2011.

"Factor in shipping, inventory costs, and other considerations, and — for many goods destined for the North American market — the cost gap between sourcing in China and manufacturing in the US will be minimal.”

The firm advised companies to "rigorously assess their global supply networks"when deciding where to base production, rather than just looking at factory prices.

It said that China remains the best choice for products that require a large workforce or that are destined for Asian markets. But it added that companies that choose to keep production in China need dramatic efficiency improvement to prosper.

One German businessman whose company makes automobile components in North China said that it's the country's winning supply chain that keeps his company anchored. But he expects more foreign companies will leave in the next five years as tax and land incentives weaken.