Written for global buyers. "China plus one" has become a default boardroom phrase. It is also frequently implemented in ways that destroy margin.
Since 2018, buyers have been shifting part of their sourcing out of China — into Vietnam, India, Mexico, Thailand, Indonesia, Turkey. The reasons are real: tariffs, de-risking, and political pressure in home markets.
But the results are mixed, and the failures follow a pattern. Here is what China+1 actually requires, and when it is the wrong answer.
What China+1 is not
It is not "move the order." Most categories that shifted to Southeast Asia still depend on Chinese inputs — fabric, components, machinery, tooling, dyes, technical staff. Moving final assembly redistributes the supply chain rather than replacing it.
Buyers who moved to reduce cost and tariff exposure frequently discovered they gained political optics and lost margin.
Where the cost actually moves
- Labour: often lower, but the gap has narrowed dramatically in Vietnam and Thailand
- Materials: frequently imported from China — sometimes at a premium, plus freight and lead time
- Yield and rework: new factories learning your product usually produce more scrap at the start
- Management: often needs Chinese or expatriate technical staff to reach required quality
- Logistics: smaller ports, fewer direct routes, higher and more volatile freight
The tariff saving is visible and immediate. These costs are distributed and appear over 6-12 months — which is why the early business case often looks better than the realised one.
When China+1 makes sense
- Tariff-driven exposure: where duty savings exceed 10-15% of landed cost
- Single-country risk concentration: where one disruption would stop your entire business
- Customer mandate: where your customer requires non-China origin for market or policy reasons
- Category fit: labour-intensive assembly with short local supply chains (apparel, simple furniture, basic electronics)
When it does not
- Deep supply-chain categories: precision components, specialty chemicals, regulated medical products — the local ecosystem does not exist yet
- Low volume: splitting a small order across two countries doubles setup cost for no benefit
- Where you lack local verification capability: moving production to a country you cannot audit simply moves the risk
The hybrid model most buyers settle on
In practice, the successful China+1 programmes are not exits — they are dual-sourcing arrangements:
- High-complexity, high-volume, cost-sensitive SKUs stay in China with verified suppliers
- Tariff-exposed, simple, labour-intensive SKUs move to a second country
- Critical components continue to be sourced from China for both locations
- Verification capability is established in both countries before orders move
The question that matters more than "where"
The more important question is not "China or Vietnam" — it is whether you can verify the supplier in whichever country you choose. Most sourcing losses come from unverified suppliers, not from the wrong country map.
Build verification capability first. Then decide where to manufacture.
The bottom line
China+1 is a risk-management decision, not a cost-reduction decision. Run the numbers over 12 months including yield, management and logistics — not just the tariff line. And do not move production to a country where you cannot independently verify what is happening on the factory floor.
— Richard Wang · Rongyitong Global Business Bridge · China sourcing risk advisor for global buyers
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