Executive summary
- China Plus One is a strategy driven by corporations to diversify their operations by expanding manufacturing or sourcing in pursuit of alternative supply chains while maintaining a presence in China. By looking beyond China, this strategy aims to mitigate risks associated with full dependence on the country’s market or supply chain in the context of rising geopolitical tensions and uncertainty.
- While major-power rivalry is a key driver of China Plus One, China’s internal problems have also contributed to supply chain shifts. These include rising labour costs, economic slowdown, ambiguous regulatory frameworks, stringent zero-Covid policies and cross-strait tensions.
- Key beneficiaries of China Plus One are India, Vietnam and Malaysia, especially in the semiconductor sector. While India and Vietnam are trying to establish themselves as players in the global semiconductor supply chain, Malaysia has a mature industry boasting more than five decades of manufacturing experience.
- The trajectory of China Plus One remains uncertain as evolving trade policies coming out of Washington continue to influence the global economic landscape. Nevertheless, the underlying need for diversification is pertinent and Malaysia continues to present itself as an attractive option, given its strategic non-alignment and experience in the semiconductor sector.
