The China-Plus-One strategy (C+1) is a global business concept and supply chain diversification approach. It involves multinational companies maintaining their core manufacturing and sourcing operations in China while simultaneously establishing or expanding production capacity in at least one other country. The strategy's core mechanism is to reduce the risk associated with over-reliance on a single country for global supply chains.
The C+1 conversation began around 2013, though the strategy was conceptualized by businesses in countries like Japan and the United States as early as 2008. It was created to solve the problem of overconcentration of business interests in China, initially driven by rising labor costs in China. The strategy gained significant momentum after the 2018 U.S. tariff actions, the supply chain disruptions caused by the COVID-19 pandemic, and escalating geopolitical tensions.
The mechanism works by companies investing in a "plus one" location, often in Southeast Asian nations like Vietnam, Thailand, or India, to serve as a secondary or backup production hub. This diversification helps mitigate risks from unpredictable trade policies, such as the U.S.-China trade war that began in 2018, and enhances supply chain resilience against unforeseen events. The strategy connects to broader concepts like supply chain resilience, de-risking, and nearshoring or reshoring. India is a key country being considered for the "plus one" location, with Indian companies like Voltas and auto component manufacturers adopting the strategy to reduce reliance on China.
The strategy has intensified recently due to geopolitical and economic factors, including the continued rise in Chinese labor costs and the need to manage tariff exposure. For instance, companies like Apple have been actively diversifying production, with plans to relocate a portion of manufacturing to countries like Vietnam and India. The fundamental goal of diversification and risk mitigation has stayed the same, but the urgency and scale of implementation have increased.