Returnees are 'seed capital' for startups

But the cost of commercializing the technology in the US would have been too high, Wen said.

The US Food and Drug Administration certification process is an expensive and complicated procedure, and hiring a team for the project would have cost at least 1 million yuan a year.

"However, I am much more familiar with the certification process in China, although the paperwork is much more time-consuming. What's more, human resources are cheaper,"Wen said.

Poon Hak Fei had a similar experience. He joined Nanosolar in Silicon Valley in California after getting his doctorate in chemical engineering at Princeton University. He then co-founded an energy storage solution startup, but he still chose to set up his first wholly owned company in Suzhou.

"To be fair, the working and living environment is very nice in the States, as well as the pay. But I do not want to miss the market opportunities in China,"he said.

Poon set up a company to make conductive nanofilm last January, with $2.2 million in strategic investment from Northern Light Venture Capital. He said he expects the company to be profitable by the end of 2013.

"The logic is to make world-class products at a lower cost in China. Meanwhile, the local government is quite efficient, and the managers from the venture capital company are very helpful,"he added. He added that a cluster of nanotechnology companies has formed in the Yangtze River Delta region, which is another plus.

Talk about China losing its labor advantage is widespread these days. According to a recent report by the Boston Consulting Group, "Made in America, Again”, the cost advantage China has over the US is shrinking fast.

"Within five years, rising Chinese wages, higher US productivity, a weaker dollar, and other factors will virtually close the cost gap between the US and China for many goods consumed in North America,"the report said.

There are also reports of manufacturer such as vehicle producers moving back to the US from China.

But people like Poon believe that for technology-intensive sectors, China still has its advantages.

"China has very smart technicians and skilled workers. They are very willing to learn, very good at solving problems. They just lack some systematic training, but they cost half as much as their US peers,"he said.

So it's possible that some blue-collar industries formerly outsourced to China will leave, but skill-intensive ones won't, he added.

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