Dispersed manufacturing achieves the greatest cumulative competitive advantage by dissecting a supply chain and assigning each process to an optimal location. Dispersed manufacturing has been an integral part of global manufacturing in China. This paper presents a bi-objective model for the supply chain design of dispersed manufacturing in the context of rising business operating costs in coastal China. It considers essential trade-offs between supply chain cost and lead time to determine optimal facility locations of manufacturing steps. The model is applied to a representative case to illustrate the cost benefits of dispersed manufacturing as opposed to performing all manufacturing steps of a product at a single facility location. It provides explanations in several factors that have benefited manufacturing growth in China, and offers insights in the emerging global manufacturing trends.