What is China Plus One?

With the threat of trade war tariffs companies like consumer electronics giant Apple are gearing up to diversify some of their manufacturing out of China.  This movement  is so common now it has a name… China Plus One.

Due to these tariffs, many American companies doing business in China have been forced to come up with a strategy to reduce dependence on China. These companies  have the bulk of their Asian operations in China, and want to keep manufacturing close by because of the supply chain for parts, etc., but they want to reduce the tariff bite as well as diversify a bit. In addition to the tariffs motivation, the increasing cost of labor (and other inputs) in China has accelerated the number of companies considering this strategy.

With China being such a big retail market, these companies are trying to ensure they do not move too much manufacturing out of China as they do not want a backlash form China. This is why Apple is calling their move a ‘trail’.

Vietnam is the number one beneficiary of this China Plus One strategy as it is considered a safe (for Americans ) country, with great cuisine and is a relatively inexpensive place to live well, and its wages are low. Also appealing to Western companies is that Vietnam is a member of ASEAN and Vietnam will be a member of the Trans-Pacific Partnership, while China is neither. India, Thailand, Indonesia and Malaysia are also destinations for companies looking to diversify their manufacturing in Asia.