In early 2020, as factories across China shut down and the world began to understand the scale of what was coming, a lot of supply chain conversations started with the same observation: “We had no idea how much of this came from one place.”

That observation has since driven one of the most significant strategic shifts in global supply chain design: the China Plus One strategy.

The concept is straightforward. Rather than concentrating manufacturing in China, companies build capacity in at least one alternative geography, creating optionality and reducing single-point exposure. In practice, executing it well is considerably more complex.

Why China Remains Indispensable

Before discussing the alternatives, let’s be honest about the baseline: China’s manufacturing ecosystem is extraordinarily difficult to replicate.

The infrastructure is unmatched. The supplier depth — the network of tier-2 and tier-3 suppliers that cluster around major manufacturing hubs — took decades to build. The workforce capability, particularly in electronics and precision manufacturing, is substantial. The sheer scale of the domestic market creates demand dynamics that no alternative geography can currently match.

Companies that rushed into China Plus One decisions immediately post-COVID sometimes discovered this the hard way. They built factories in Vietnam or India and found that key components still had to be sourced from China, partially defeating the resilience purpose. They encountered infrastructure gaps, skills shortages, and longer ramp times than their models predicted.

China Plus One, done properly, is not a replacement strategy. It is a diversification strategy. The distinction matters.

Vietnam: The Most Visible Beneficiary

Vietnam has attracted the largest share of manufacturing investment from China Plus One strategies, particularly in electronics, textiles, and consumer goods. Several factors explain this:

Geographic proximity. Hai Phong, Vietnam’s major northern port, sits approximately 550 miles from Shenzhen. Supply chain relationships — supplier visits, logistics routes, quality management — can be maintained across this distance with relative ease.

Trade agreements. Vietnam has a strong network of free trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement. These create genuine tariff advantages for companies manufacturing there and exporting to key markets.

Cost position. Labour costs remain lower than China’s coastal manufacturing centres, though the gap has narrowed significantly in recent years as Vietnam’s economy has grown.

The results show up in the data. Foreign direct investment into Vietnam surged after 2020, with manufacturing accounting for the largest share. Samsung, Intel, LG, and hundreds of other companies have significantly expanded Vietnamese operations.

The Broader Landscape

Vietnam is not the only option, and for many categories, it is not the right one. A few observations on the broader geography:

India offers scale that Vietnam cannot, a large and growing domestic market, and government incentives through the Production Linked Incentive (PLI) scheme. The challenges — infrastructure variability, logistics complexity, regulatory environment — are real but improving. For companies thinking about a 10-year horizon, India warrants serious attention.

Indonesia has been underestimated. It has significant natural resources, a large labour force, and a growing middle class. It’s particularly relevant for companies in extractive industries, food processing, and consumer goods.

Mexico is the dominant near-shore option for companies with significant North American market exposure. The US-Mexico-Canada Agreement (USMCA) and geographic proximity make it compelling for categories where speed-to-market matters.

What Good Execution Looks Like

Having worked with companies navigating these decisions, I’ve observed a consistent set of factors that separate successful China Plus One implementations from disappointing ones.

Start with risk, not cost. The strategic logic of China Plus One is resilience, not arbitrage. Companies that approach it as a cost reduction exercise often underestimate transition costs and overestimate savings. Start by mapping your actual exposure — which categories, which suppliers, which routes — and let that drive the prioritisation.

Don’t underestimate the ecosystem problem. Moving final assembly is relatively straightforward. Moving an entire supply chain ecosystem is not. Understand, for each category you’re considering, how much of the upstream supply base would also need to move, and whether a viable alternative ecosystem exists.

Invest in supplier development. Alternative geographies often have the capacity but not yet the capability. Investing in supplier quality development and technical training is often the difference between a factory that meets your specifications and one that doesn’t.

Maintain China relationships. This is a diversification strategy, not an exit strategy. The companies that will fare best are those that maintain strong China operations while building genuine alternatives. The goal is options, not dependence.

The Underlying Principle

China Plus One is ultimately an expression of a more fundamental principle: resilient supply chains require deliberate redundancy.

This is a principle that cuts against the efficiency logic that dominated supply chain thinking for the past three decades. Lean, just-in-time, single-source: these approaches optimise for cost and speed in a stable world. They create fragility in a world where disruption — whether from pandemics, geopolitics, climate, or technology shifts — is increasingly predictable in its unpredictability.

The leaders I’ve watched build genuinely resilient supply chains don’t think of resilience as a cost. They think of it as a capability that pays for itself when it matters.

And in the world we’re navigating, it will matter.

Kaushik Ghatak advises organisations on supply chain strategy, resilience, and digital transformation. He is the Founder and Director of ValueQwest Pte. Ltd., Singapore.