Since American manufacturing peaked in 1979, 7.5 million manufacturing jobs have been lost to countries that offered lower productions costs. China has been the chief beneficiary of this mass exodus of manufacturing. For years, it seemed to be a foregone conclusion that these jobs were gone for good. That is no longer the case.

Although China ranks first in the world for manufacturing competitiveness according to research from the Boston Consulting Group(BCG), the United States has risen to number two. In fact, China's manufacturing costs are now less than five percent lower than the U.S. This renaissance has been driven in large part by lower energy costs, favorable currency exchange rates, stable wage growth and sharp increases in productivity.

In China, higher standards of living have led to sharp wage increases - at least 15 percent annually for the past three years - while productivity growth has been slow. Although energy only represents five to seven percent of manufacturing input costs according to Empirical Research Partners, lower domestic energy costs, especially natural gas, are making American manufacturing more competitive. During the last 10 years, natural gas prices dropped 25 percent in the U.S. and rose 138 percent in China.

Another factor contributing to the narrowing gap between the U.S and China is shipping. Not only is it more expensive to have products shipped from China than a domestic manufacturing plant, but it also slows time to market. Higher labor costs in China make it increasingly difficult to justify transportation costs, and many companies can't afford to wait to introduce or replenish their supplies. U.S. manufacturing provides companies with greater flexibility and business agility.

For every dollar in U.S manufacturing costs, it now cost 96 cents to manufacture in China, and that's before transportation and inventory costs. Research from Alix Partners suggests that the U.S. and China will have equal manufacturing costs by as early as 2015.

Although the manufacturing battle between the U.S. and China is largely driven by cost, one overlooked factor is pollution. A study published by Proceeding of the National Academy of Sciences found that emissions from Chinese manufacturing industry actually travel across the Pacific Ocean and contribute to pollution and lower air quality, especially in the western U.S. This is just one more result of cheap manufacturing.

Despite the resurgence of American manufacturing, challenges remain. Many of the available positions require highly specialized training, and companies are struggling to find qualified candidates, especially in industries such as energy, robotics and information technology. Also, modern technology and production methods make it possible for companies to produce more with fewer workers. Those lost jobs will not be returning. However, jobs lost to China have indeed begun to come home.

Clearly, the tide is turning. Major brands like Apple, Wal-Mart, General Electric and Ford have already brought or announced their intentions to move manufacturing to the U.S. Outsourcing and offshoring, two trends viewed as nails in the coffin of American manufacturing, are being replaced by insourcing and reshoring. “Made in America” is a phrase that corporations - and more importantly, their customers - value heavily.

Yes, China is still the dominant world power in manufacturing, but their stranglehold is loosening. The U.S. has been gaining ground for three years, and there are no indications that this trend will be reversed.