Introduction

The China+1 strategy is a supply-chain diversification approach in which firms maintain production or sourcing in China while establishing manufacturing capacity in at least one additional country. The objective is to reduce reliance on a single manufacturing location while preserving access to China’s large-scale industrial ecosystem and supplier networks.¹²

Core characteristics of the China+1 strategy

1. Diversification rather than withdrawal

China+1 does not involve abandoning China as a production base. Many firms continue to rely on China for higher-value manufacturing, supplier coordination, intermediate inputs, or logistics hubs while relocating selected production stages — often assembly or labor-intensive processes — to other economies.¹³ The strategy therefore reflects diversification of production geography rather than wholesale decoupling from China.

2. Risk management and supply-chain resilience

The strategy gained momentum as companies sought to manage rising geopolitical tensions, tariff risks, regulatory uncertainty, and disruptions to global logistics. Diversifying manufacturing locations reduces exposure to country-specific shocks and allows firms to shift production across facilities when disruptions occur. Supply chains in Asia are becoming more geographically distributed while remaining interconnected through regional production networks.²⁴

3. Alternative manufacturing hubs

The “+1” location is commonly found in emerging manufacturing economies such as Vietnam, India, Thailand, Indonesia, or Mexico. These locations offer competitive labor costs, improving infrastructure, and expanding integration into global value chains. In Asia, the relocation of selected production stages has reinforced the role of Southeast Asia and India as complementary manufacturing platforms linked to China-centered supply networks.¹²⁵

4. Regional supply-chain reconfiguration

China+1 contributes to a more distributed structure of global manufacturing. Production stages are increasingly spread across several economies, improving resilience while preserving the efficiencies created by specialization within regional value chains. Even as some manufacturing activities move elsewhere, China continues to supply a large share of intermediate goods, machinery, and industrial inputs that underpin production in neighboring economies.²³⁴

Conclusion

The China+1 strategy represents a gradual diversification of global manufacturing rather than a departure from China’s industrial system. Firms maintain operations in China while expanding production elsewhere to reduce concentration risk and improve resilience. The outcome is a more regionally distributed supply-chain structure in which China remains a central supplier and industrial hub.¹²⁴