Everything You Need to Know About China Plus One

Article Highlights:

• The China Plus One Strategy (C+1) is a supply chain approach that encourages companies to diversify their supply chains away from China in order to mitigate risk.
• The strategy emerged in 2013 due to concerns about global dependency on China. Since then, it’s gained ground with trade tensions, COVID-19 disruptions, and rising labor costs.
• New markets are emerging as alternatives to China, including Vietnam and India.
• Choosing a “plus one” location includes evaluating costs, geopolitical stability, infrastructure, and supplier reputations.

China Plus One is a diversification strategy that garnered global attention between 2014 and 2015 due to the escalating cost of labor in China, leading multinational companies to seek alternative manufacturing and sourcing options in other Asian countries. While some swiftly embraced the approach at that time, others remained skeptical of its value beyond business theory.

A decade since it initially surfaced, the China Plus One strategy has seen a resurgence fueled by a combination of geopolitical tensions, rising labor costs, and a Trump administration trade policy that has furthered instability between the U.S. and China. 

Now more than ever, global businesses, executives, and media outlets are eager to explore diversifying and de-risking away from China. But how feasible is China Plus One, really?

What Is the China Plus One Strategy?

The China Plus One Strategy, also known as Plus One or C+1, is a supply chain strategy that encourages companies to minimize their supply chain dependencies on China by diversifying the countries from which they source parts. The goal is to reduce the risks associated with overreliance on a single country. It’s essentially acting on the idea of not putting all your eggs in one basket. 

So how did this strategy start? It’s no secret that many Western countries, including the U.S., have relied heavily on China when it comes to outsourcing their manufacturing. Reasons for this include:

• Low labor and production costs. 
• China’s strong domestic market, supply chain, and infrastructure.
• Free trade and tax agreements.
• High growth potential. 

Regardless of the reasoning behind this reliance, people began to notice that the global dependency on China was becoming a risk as early as 2008. The official China Plus One strategy, however, would not be introduced until 2013.

This new strategy would allow businesses to continue investing in China, but with the additional de-risking measure of spreading their operations across multiple countries (the “plus one”). By establishing additional sourcing and manufacturing locations outside of China, companies found a way to mitigate business risks, access new consumer markets, and explore other technological innovations, all while keeping their operations cost-effective.

Is the China Plus One Strategy Still Relevant in 2025?

Today, geopolitical and economic factors drive much of the urgency behind businesses incorporating China Plus One into their supply chain strategies. During its first year in office, the Trump administration has implemented substantial tariffs on China on multiple occasions, engaging in a trade war that saw import duties temporarily rise well north of 100%. As tensions escalated at various points throughout 2025, businesses have become uncertain about just how tenable their sourcing from China is going to be in the long term. 

While the Trump administration has engaged in some trade negotiations with China and delayed implementation on certain tariffs until November 2025, sourcing from the country still carries significant risks. Diplomatic relations between the U.S. and China remain tense, even chilly, and recent history has shown just how easily those hostilities can spill over into the economic and trade spheres. 

The Pros and Cons of China Plus One 

It's important to note that while the China Plus One strategy offers opportunities for improved market access, it also comes with challenges. Every strategy comes with drawbacks, and it’s up to you to decide whether it’s worthwhile to pursue for your business. If you’re considering adopting a China Plus One strategy, here are a few pros and cons to consider. 

China Plus One Pros

Risk Mitigation

Risk mitigation is the likely reason you’re considering China Plus One in the first place. Supply chain disruptions can be caused by a number of factors, from natural disasters to political tensions to global pandemics. If you’re supplying predominantly from a single country, it only takes one of these disruptions for your production process to be suddenly suspended. China Plus One encourages manufacturers to establish suppliers in multiple countries, reducing risk and resulting in a highly adaptable supply chain—one that can withstand the unexpected.

Better Compliance Management

Legislation like the Uyghur Forced Labor Prevention Act (UFLPA), which was introduced by Congress in 2022 to help combat forced labor policies in parts of China, also play a role in the desire to diversify. Companies that violate these requirements (knowingly or otherwise) may see their products seized at the border. In addition, any connections to forced labor could seriously damage a business’s reputation and credibility among consumers, investors, and other key stakeholders. In other words, bad actors leveraging forced labor in China can pose a serious risk to U.S. importers. De-risking away from these ESG hazards can be a very reasonable direction for companies to take. 

Market Access 

Choosing your “Plus One” destinations allows your company to tap into different markets, which you can strategically use to your company’s advantage. If you’re looking to better understand consumer behavior, trends, and demands in certain parts of the world, diversifying your manufacturing or supply chain operations to those areas can help you learn more about your target consumers. 

Labor Costs

Rising labor costs in China is another major reason for the emergence of China Plus One. While China was initially known for its cheap labor and highly efficient production, they aren’t the only country in the world that offers this advantage anymore. Adopting China Plus One allows your company to explore other competitive labor markets—including South Asian countries like Malaysia, Vietnam, Thailand, and Indonesia—as well as the favorable exchange rates and tax incentives those nations may be able to offer foreign investors. 

Technological Expertise 

Certain regions and countries are known for their expertise in specific industries and technologies. By expanding your manufacturing to these countries, your company can gain access to new technologies that may not be readily available elsewhere, giving it a competitive edge. Additionally, you can tap into specialized labor markets in these areas, populated by individuals with unique technological expertise that could help advance your company over the longer term.

China Plus One Cons

Upfront Costs

This is a classic case of the saying, “sometimes you need to spend money before you make money.” While a correctly implemented China Plus One strategy can ultimately lead to cost savings, you’ll need to invest time in finding new suppliers, making sure they meet your regulatory and trade compliance needs, and better understanding the new risks and advantages that come with a new location. 

Quality Control 

Production looks different when you begin to expand your supply chain across multiple countries, specifically when it comes to quality control. Ensuring consistent product quality demands meticulous monitoring, testing, and compliance efforts. Failure to implement quality control measures across your operations could lead to poor customer satisfaction and a bad brand reputation. To avoid these outcomes, you’ll have to invest in additional resources to maintain standards throughout the supply chain.

Economic and Political Risks

Companies must assess the economic and political risks that are associated with their “Plus One” countries. These include:

• Currency fluctuations
• Labor strikes
• Regulatory landscape and evolving regulations
• Existing geopolitical tensions with the U.S. 

The need to stay ahead of shifting political dynamics and unfamiliar economic backdrops requires more resources and risk management strategies to prevent potential disruptions. 

How to Choose Your “Plus One” Location

Once you’ve made the decision to move forward with a China Plus One strategy, you’ll need to begin evaluating potential alternative locations. Beyond evaluating your current production risks, needs, and goals, you’ll also need to carefully consider the following factors:

Costs 

Balancing cost-effectiveness and operational efficiency ensures sustainable supply chain diversification while maintaining competitiveness. This is why costs should be the first thing you evaluate when choosing your new locations. 

Additionally, you’ll want to understand how local regulations, business laws, and government policies affect costs. Be sure to identify any incentives or benefits offered to foreign businesses, such as tax breaks or trade agreements.

Geopolitical and Economic Risk

Businesses considering expanding their sourcing to new countries should thoroughly assess the geopolitical and economic stability of the potential China alternatives. This entails examining political conditions, government stability, and economic indicators, including GDP growth, foreign direction investment (FDI), and trade agreements. In 2025, companies should also be carefully assessing the tariff rates between the U.S. and the potential China Plus One candidate. 

You’ll want to do an in-depth analysis of all these factors, in order to understand potential impacts on import and export costs, as well as the relationship between your new country and target markets. 

Infrastructure and Logistics

One of the reasons China appeals to so many businesses is due to the nation’s strong infrastructure and supply chain. According to the China Briefing, China is the only country that possesses all the industrial categories in the United Nations industrial classifications, which allows firms to source goods easily. China also has some of the largest networks of high-speed rails and expressways in the world, allowing products to be transported efficiently. 

These advantages can be hard to beat, and businesses will want to pore over the “plus one” country’s logistics carefully. Things to look at include transportation networks, ports, roads, and utilities. Additionally, firms should analyze the country’s proximity to key markets and connectivity to major trade routes, both of which can impact overall supply chain efficiency and related costs.

Supplier Reputation and Financial Health

When it comes to working with new suppliers, understanding their financial health, industry reputation, and history of reliability and performance is also paramount. Ensuring supply chain resilience involves assessing their ability to navigate disruptions and maintain operations during crises. You should also consider if there’s potential for a long-term relationship with your new suppliers. As part of carrying out a comprehensive assessment, you’ll want to look at their ability to collaborate, their technological investments, and their growth. Taking all these factors into account, backed by an understanding of your industry and business requirements, will aid in making a well-informed decision when selecting a new supplier in a different country.

Workforce 

Employees are the backbone of every business, which means your “Plus One” country needs to be equipped with the right workforce. First, evaluate your company employment needs, including your ideal skillset. Then, assess each potential country’s labor market by asking yourself questions like, “Is this country’s workforce skilled in specific technologies?”, or, “Is this country’s workforce large enough to meet my business needs?” You’ll also want to consider factors like education, training programs, and employment stability in your evaluations, in addition to the size and availability of the labor market. 

“China Plus One” Countries

Over the past few years, media attention has increasingly turned toward India and Vietnam as two emerging nations vying for primacy among the China Plus One contenders. Both countries have reported increased investments from American businesses. This is due to their competitive advantages, strategic geographic locations, growing economies, skilled workforces, and business-friendly policies.

India

India has gained media attention during the 2020s as a promising China Plus One destination. The World Bank CEO even spoke out about the country, urging India to “cash in on the 'China plus one' opportunity.”

As one of the only countries with a labor force and market size comparable to China, India is in a unique position to replace some of its manufacturing base. India also boasts a strategically sound location, and is an attractive alternative from the perspective of government policies and incentives. 

India's growing electronics manufacturing sector also adds to its appeal: the country’s electronics exports have tripled since 2018. As a China Plus One country, India's strategic advantages, coupled with its growing economic power and market accessibility, position it as a compelling choice.

Vietnam

A 2023 article by the Financial Times highlighted Vietnam's growing appeal for businesses aiming to reduce dependence on China. The publication named the country a “vital link” to global supply chains. Its strategic geographic proximity to China, coupled with a skilled and cost-effective labor force, presents the perfect environment for companies looking for a viable supply chain alternative. 

According to the article, government data showed that Vietnam generated $22.4bn from foreign direct investment projects in 2022. This represents an increase of 13.5% over the previous year. Two years later, in 2024, that figure ticked further upward to $25.4 billion. Vietnam has also been working to make strides in both workforce education and infrastructure over the last few years, while also expanding their participation in free trade agreements. 

The Future of China Plus One 

The China Plus One strategy will continue to play a pivotal role in shaping the landscape of where products are made. The shift is already happening, with many automotive and electronics companies expanding their operations to not only India and Vietnam, but other China Plus One nations like Mexico. 

In the volatile trade landscape that has emerged in 2025, businesses should have a plan A, B, and C in place. Although much has changed since the China Plus One strategy was first introduced in the 2010s, it still represents an effective way to build supply chain resilience and mitigate the risks endemic to China. 

Companies interested in expanding their risk visibility at the level of countries, suppliers, sites, and parts should explore supply chain risk management (SCRM) platform Z2Data. The solution can help businesses develop a deeper understanding of the hazards associated with their Chinese suppliers, while also providing the data and intelligence critical to exploring manufacturers in China Plus One countries. To learn more about Z2Data and how it can help your business modernize its supply chain strategies, schedule a free trial with one of our product experts.