According to the survey, manufacturers are two-to-three times more likely to decrease sourcing in China.

AMR Research’s newest quarterly report suggests companies seeking to build or enhance outsourcing operations may to be dropping out of China, citing high risk that is no longer worth the reward.

In addition to this shift, the survey hints that after the fears sparked by soaring fuel prices following by a tanking world economy last year, corporations seem to be settling back into their old fears, said Noha Tohamy, a vice president at AMR.

AMR surveyed decision-making executives at 133 manufacturers and retailers, more than half of which each record over $5 billion in revenue. According to the survey, manufacturers are two-to-three times more likely to decrease sourcing in China. The survey found China contributes the most risk in 12 out of 15 categories. At the top of the list is Intellectual Property (IP) infringement, with 59% of respondents complaining that China poses the highest risk in the world for outsourcing.

Tohamy called IP infringement “a common problem” in China, where there is a history of outsourced manufacturers completely disregarding IP concerns. This has led to a flood of counterfeit products in Chinese markets. In addition,

Tohamy said manufacturers who disregard IP issues usually also disregard product safety directives, which has led to many public recalls that have been expensive and embarrassing for their parent companies overseas. The survey reflects this fear, too, with 55% of respondents saying China poses the most risk worldwide for product quality.

“It’s almost lawless in China when it comes to intellectual property law and understanding,” she said.

Overall, manufacturers are most worried, no matter where they outsource, about supplier failure--the top concern now. Tohamy said that’s a shift from over a year ago, when commodity and energy costs were the prime concern.

Tohamy said the change is more a reflection of a lack of fear of fuel prices than an increase in actual risk of supplier failure. Now that oil is no longer selling at $150 a barrel, manufacturers are going back to what they used to worry about.

“Supplier failure is an inherent problem in all supply chains,” she said.

Another area where risk has dropped is consumer spending. The survey showed the collective risk has gone down by 8% since the previous quarter. Tohamy said that is, in part, caused by a change in consumer spending, but it is also a reflection of companies learning to compensate for lower spending.

Tohamy said other trends observed in the survey included a change in usage of software modeling. While companies have been using software to help manage supply chains for years, Tohamy said this survey shows more than twice as many companies are using simulation and modeling tools than ever before.