China Plus One Strategy: How Asia is Redefining the Global Supply Chain

As global supply chains face increasing scrutiny and geopolitical tensions continue to reshape trade patterns, the China Plus One strategy has emerged as a key playbook for companies looking to safeguard their operations while staying competitive. This strategy, centered on diversifying manufacturing bases beyond China, is rapidly transforming Asia’s economic landscape.

China Plus One strategy has emerged as a key playbook for companies looking to safeguard their operations while staying competitive

Why "China Plus One" Matters

For decades, China has been the factory of the world, thanks to its robust infrastructure, skilled labour, and massive production capacity. However, rising labour costs, stringent COVID-19 lockdowns, and mounting U.S.-China trade tensions have pushed multinational firms to rethink their dependence on China.

The China Plus One strategy allows them to maintain a strong China presence while adding an alternative manufacturing location elsewhere in Asia.

Asia’s Rising Stars in the “Plus One” Game

Several Asian countries have become attractive options for global businesses looking to diversify:

1. Vietnam

• Strengths: Strong trade agreements (e.g., RCEP, EVFTA), cost-effective labour, and growing electronics and garment sectors.

• Key Players: Samsung, Apple suppliers, Nike.

  
  

2. India

• Strengths: Large workforce, government incentives under “Make in India,” and expanding smartphone and automotive industries.

• Key Players: Foxconn, Pegatron, Tesla exploring entry.

  
  

3. Thailand & Malaysia

• Strengths: Established electronics and automotive industries, government-backed industrial parks, and solid logistics infrastructure.

• Key Players: Toyota, Western Digital, Sony, BYD.

  
  

4. Indonesia

• Strengths: Abundant natural resources, growing nickel and EV battery ecosystem, and competitive labour costs.

• Key Players: BYD, Hyundai, LG Energy Solutions.

  
  

Benefits for Corporates

• Risk Mitigation: Reduces exposure to single-country disruptions.

• Trade Flexibility: Bypasses tariffs and capitalizes on free trade agreements.

• Cost Efficiency: Balances labour and operating costs across multiple geographies.

• Market Expansion: Proximity to growing Southeast Asian consumer markets.

  
  

Challenges to Watch

• Infrastructure gaps: Some “Plus One” nations still lag in port, road, and logistics capabilities.

• Regulatory hurdles: Inconsistent business environments can delay expansion.

• Skill gaps: Labor quality and productivity may not yet match China’s standards.

• Supply chain ecosystem: China’s deep manufacturing ecosystem is hard to replicate quickly.

  
  

Looking Ahead

While China remains an irreplaceable part of the global manufacturing puzzle, the China Plus One strategy is reshaping investment flows across Asia. The shift promises new growth opportunities for emerging economies and marks a paradigm shift in global supply chain resilience. For forward-looking businesses, adopting this strategy is no longer optional — it’s essential.