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China has its own '+1' strategy and Southeast Asia is it

Interesting perspectives on China +1, an often misunderstood economic & trade reality that is based on high value market growth in SE Asia and no longer just based on cheap labour and manufacturing costs.

Increasingly, Chinese companies are finding the region an appealing alternative to compensate for their loss in market growth elsewhere, say Dr Lau Kong Cheen and Dr Vanessa Liu.

There is a concept among the business community known as the “China Plus One (+1)” strategy where China remains the main supply source or consumer market for a company but a business diversifies certain operations to other countries.

Companies with a stake in the lucrative Chinese market may find it imperative to diversify their supply chains for a variety of reasons: Rising business costs in China, uncertainties stemming from the US-China trade spat and, more recently, border closures owing to COVID-19.

"It is worth emphasising that China appears ahead of the global curve when it comes to restarting the economy following months of lockdown, and many of the reasons why companies are in China in the first place still hold true today," Alan Beebe, President of AmCham China, was quoted in an Apr 17 press release detailing a joint survey with PwC of 25 US companies in China.

"As a result, we expect to see companies adopting a 'China + 1' strategy as a way to diversify supply chain risks while tapping into China market opportunities."

However, recent trends point to China adopting its own “+1” strategy. Southeast Asia appears to be at the heart of that approach, particularly for China tech behemoths.

Chinese business ventures are not new to the region as large tech giants such as Huawei and Alibaba, have a considerable presence in the region’s markets directly or through affiliates.

Further, data compiled by the AidData Research Lab, affiliated to the College of William & Mary in the US, titled China’s Public Diplomacy in East Asia and the Pacific 1.0, shows China has contributed to a steady flow of infrastructure investment projects in Cambodia, Indonesia, Myanmar and Vietnam between 2001 and 2016.

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