China Plus One

Last updated

China Plus One, also known simply as Plus One or C+1, is the business strategy to avoid investing only in China and diversify business into other countries, or to channel investments into manufacturing in other promising developing economies such as India [1] [2] [3] , Thailand [4] , Turkey [5] or Vietnam. [6] For the last 20 years, western companies have invested mainly in China, drawn in by their low production costs, and enormous domestic consumer markets. [7] Developing from the overconcentration of business interests in China, it may be done for reasons of cost, safety, or long-term stability. It has also been described as a 'macro-level phenomenon'. [8] [9]

Contents

Corporate C+1 strategies

The increasing cost of doing business in China has also increased operating costs, especially for manufacturers. [10] [11] The advantages of the cheap labor and market demand that China initially provided has increasingly been overshadowed by the advantages that ASEAN countries can provide. These benefits include cost control, as workers in Southeast Asian countries are generally less expensive than Chinese employees, risk diversification, and new market access into economies [12] There is also a high level of risk for investors in the Chinese transitional economy, the sources of this risk can be credited to social, and political change. [13]

Multinational corporations have been looking at countries with adequately stable governments such as India, Vietnam, Indonesia, Malaysia, Thailand, Philippines and Bangladesh . [14] Countries like Japan and United States are part of the phenomenon, with the strategy conceptualizing in businesses in these countries as early as 2008. [9] However the China Plus One strategy has its own share of difficulties, including navigating new laws, new markets, and streamlining the business over multiple locations. [15] Some say that moving out of China now is not even practical. [16] The China Plus One strategy does give China its own benefits. China is able to maintain low-end manufacturing while also growing higher-value sectors. China Plus One strategy did not reduce the number of manufacturers, nor jobs in manufacturing. It does, however, reduce the number of growth, giving other economies a chance to flourish. [17]

Following the COVID-19 pandemic, numerous Indian companies have adopted strategy to find alternative supply chains. [18] India's largest air conditioner manufacturer Voltas has started production of motors in India to reduce its reliance on China; Indian auto component manufacturers[ who? ] are also building the base to shift out of China, changing reliance to local vendors for some components; the same is the case for pharma companies[ who? ]. [18]

See also

Related Research Articles

<span class="mw-page-title-main">Economy of Vietnam</span>

The economy of Vietnam is a developing mixed socialist-oriented market economy. It is the 35th-largest economy in the world by nominal gross domestic product (GDP) and the 26th-largest economy in the world by purchasing power parity (PPP). It is a lower-middle income country with a low cost of living. Vietnam is a member of the Asia-Pacific Economic Cooperation, the Association of Southeast Asian Nations and the World Trade Organization.

<span class="mw-page-title-main">ASEAN</span> International organization of Southeast Asian countries

The Association of Southeast Asian Nations, commonly as ASEAN, is a political and economic union of 10 states in Southeast Asia. Together, its member states represent a population of over 600 million over a land area of 4.5 million km2 (1.7 million sq mi). The bloc generated a purchasing power parity (PPP) gross domestic product (GDP) of around US$10.2 trillion in 2022, constituting approximately 6.5% of global GDP (PPP). ASEAN member states include some of the fastest growing economies in the world.

A multinational corporation (MNC) – also called a multinational enterprise (MNE), transnational enterprise (TNE), transnational corporation (TNC), international corporation, or stateless corporation, with subtle but contrasting senses – is a corporate organization that owns and controls the production of goods or services in at least one country other than its home country. Control is considered an important aspect of an MNC to distinguish it from international portfolio investment organizations, such as some international mutual funds that invest in corporations abroad simply to diversify financial risks. Black's Law Dictionary suggests that a company or group should be considered a multinational corporation "if it derives 25% or more of its revenue from out-of-home-country operations".

<span class="mw-page-title-main">Bombay Stock Exchange</span> Indian stock exchange in Mumbai

BSE Limited, also known as the Bombay Stock Exchange (BSE), is an Indian stock exchange which is located on Dalal Street, known as the Wall Street of Mumbai, in turn described as the New York of India. Established in 1875 by cotton merchant Premchand Roychand, it is the oldest stock exchange in Asia, and also the tenth oldest in the world. The BSE is the world's 8th largest stock exchange with a market capitalization exceeding US$4.5 trillion as of January 2024.

<span class="mw-page-title-main">Foreign direct investment</span> Purchase of an asset

A foreign direct investment (FDI) refers to purchase of an asset in another country, such that it gives direct control to the purchaser over the asset. In other words, it is an investment in the form of a controlling ownership in a business, in real estate or in productive assets such as factories in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment or foreign indirect investment by a notion of direct control.

<span class="mw-page-title-main">Economy of Asia</span>

The economy of Asia comprises about 4.7 billion people living in 50 different nations. Asia is the fastest growing economic region, as well as the largest continental economy by both GDP Nominal and PPP in the world. Moreover, Asia is the site of some of the world's longest modern economic booms.

An emerging market is a market that has some characteristics of a developed market, but does not fully meet its standards. This includes markets that may become developed markets in the future or were in the past. The term "frontier market" is used for developing countries with smaller, riskier, or more illiquid capital markets than "emerging". As of 2006, the economies of China and India are considered to be the largest emerging markets. According to The Economist, many people find the term outdated, but no new term has gained traction. Emerging market hedge fund capital reached a record new level in the first quarter of 2011 of $121 billion. Emerging market economies’ share of global PPP-adjusted GDP has risen from 27 percent in 1960 to around 53 percent by 2013. The ten largest emerging economies by nominal GDP are 5 of the 10 BRICS countries along with Indonesia, Mexico, Poland, South Korea, and Turkey.

<span class="mw-page-title-main">BRIC</span> Group of four emerging national economies

BRIC is a term describing the foreign investment strategies grouping acronym that stands for Brazil, Russia, India, and China. The separate BRICS organisation would go on to become a political and economic organization largely based on such grouping.

Economic liberalization, or economic liberalisation, is the lessening of government regulations and restrictions in an economy in exchange for greater participation by private entities. In politics, the doctrine is associated with classical liberalism and neoliberalism. Liberalization in short is "the removal of controls" to encourage economic development.

<span class="mw-page-title-main">Chinese Century</span> Neologism suggesting that China may dominate the 21st century geoeconomically or geopolitically

The Chinese Century is a neologism suggesting that the 21st century may be geoeconomically or geopolitically dominated by the People's Republic of China, similar to how the "American Century" refers to the 20th century and the "British Centuries" to the 18th and 19th, same in the 17-18th centuries dominated by France and the 15-16th centuries dominated by Spain. The phrase is used particularly in association with the prediction that the economy of China may overtake the economy of the United States to be the largest in the world. A similar term is China's rise or rise of China.

<span class="mw-page-title-main">Automotive industry in China</span> Overview of China automotive industry

The automotive industry in Chinese mainland has been the largest in the world measured by automobile unit production since 2008. As of 2024, China is also the world's largest automobile market both in terms of sales and ownership.

<span class="mw-page-title-main">Economy of Gujarat</span>

The economy of Gujarat, a state in Western India, is the most industrialised in India, having the highest industrial output of any state in the union.It has the highest exports of any Indian state, accounting for 33% of all Indian exports in 2022-23. It leads in diverse industrial sectors such as chemicals, petrochemicals, dairy, drugs and pharmaceuticals, cement and ceramics, gems and jewellery, textiles and engineering. It has the highest Electricity Production Capacity and Maritime Port Cargo Volume among all states in India. It also has significant agricultural production with major agricultural produce of the state being cotton, groundnuts (peanuts), dates, sugar cane, milk and milk products. Gujarat recorded the lowest unemployment rate in India in 2022, with 4.4% of the labour force being unemployed.

<span class="mw-page-title-main">Economy of China</span>

China has an upper middle income, developing, mixed, socialist market economy incorporating industrial policies and strategic five-year plans. It is the world's second largest economy by nominal GDP, behind the United States, and the world's largest economy since 2016 when measured by purchasing power parity (PPP).. China accounted for 19% of the global economy in 2022 in PPP terms, and around 18% in nominal terms in 2022. Historically, China was one of the world's foremost economic powers for most of the two millennia from the 1st until the 19th century. The economy consists of public sector enterprises, state-owned enterprises (SOEs) and mixed-ownership enterprises, as well as a large domestic private sector and openness to foreign businesses in their system. Post-1978 economic reforms China's average GDP growth had been over 10% annually for over three decades, and in some years even exceeded 13% annually. China is expected to remain the top contributor to global growth, at around 21% of global growth through 2029, higher than the G7 economies combined.

<span class="mw-page-title-main">Pakistan–Vietnam relations</span> Bilateral relations

Pakistan-Vietnam relations, or Pakistani-Vietnamese relations, refers to the bilateral relationship between the Socialist Republic of Vietnam and Islamic Republic of Pakistan. The relationship is largely based on mutual trade and international political cooperation between the two countries. Pakistan is represented in Vietnam by its embassy in Hanoi, and Vietnam also maintains an embassy in Islamabad. During the Cold War, Pakistan maintained close ties with the United States-led Western Bloc to counter rival India's allegiance with the Soviet Union and Eastern Bloc. Throughout the 1960s and 1970s, the United States was involved in the Vietnam War against Soviet-backed North Vietnam while in the same time period, Pakistan had engaged in two major wars with neighbouring India in 1965 and 1971, the latter of which resulted in a devastating defeat for Pakistan and saw the emergence of an independent Bangladesh. Due to the fact that Pakistan was an ally with the United States and had begun to indirectly wage war against the Soviets in Afghanistan with heavy U.S.−backing, relations became strained between the two, with Pakistan closing its diplomatic mission in Vietnam in 1980 and Vietnam doing the same in 1984. However, relations greatly improved in the 2000s, and Pakistan reopened its embassy in Hanoi in October 2000. Vietnam also reopened its embassy in Islamabad and trade office in Karachi in December and November 2005, respectively. Relations between the two countries have continued to remain friendly, with Vietnam expressing an interest in increased economic and military cooperation with Pakistan. The heads of both nations have in recent times paid official visits to each other, with Pakistani President Pervez Musharraf visiting Vietnam in May 2001 and Vietnamese President Trần Đức Lương also paying an official visit to Pakistan in March 2004. Throughout the following decade, several visits were made by various Vietnamese and Pakistani ministries to each other. A major part of Pakistan's pursuit to enhance its relationship with Vietnam is outlined in Pakistan's "Vision East Asia" strategy. The emergence of such a strategy came as a result of Pakistan's desire to balance its relations with Vietnam and other East Asian / Southeast Asian states by making an effort to circumvent Pakistan's close relationship with China and Vietnam's growing relationship with India—the former being a cause of concern for Vietnam due to its tense relationship with China and the latter being a cause of concern for Pakistan due to its rivalry and history of armed conflict with India.

The Mumbai Consensus is a term used to refer to India's particular model of economic development, with a "people-centric" approach for managing its economy which may be taken up by other developing nations in time. Indian model of economic growth, which relies on its domestic market more than exports, boosted domestic consumption rather than investment, pursued service-oriented industries rather than low-skilled manufacturing industries, and has greatly differed from the typical Asian strategy of exporting labor-intensive, low-priced manufactured goods to the West. This model of economic development remains distinct from the Beijing Consensus with an export-led growth economy, and the Washington Consensus focused instead on encouraging the spread of democracy and free trade.

The middle income trap is an economic development situation in which a country that attains a certain income gets stuck at that level. The term was introduced by the World Bank in 2007 who defined it as the 'middle-income range' countries with gross national product per capita that has remained between $1,000 to $12,000 at constant (2011) prices.

<span class="mw-page-title-main">Clothing industry</span> Industry encompassing the design, manufacturing, wholesaling and retailing of clothes

Clothing industry or garment industry summarizes the types of trade and industry along the production and value chain of clothing and garments, starting with the textile industry, embellishment using embroidery, via the fashion industry to apparel retailers up to trade with second-hand clothes and textile recycling. The producing sectors build upon a wealth of clothing technology some of which, like the loom, the cotton gin, and the sewing machine heralded industrialization not only of the previous textile manufacturing practices. Clothing industries are also known as allied industries, fashion industries, garment industries, or soft goods industries.

<span class="mw-page-title-main">Made in China 2025</span> Chinese industrial policy

Made in China 2025 is a national strategic plan and industrial policy of the Chinese Communist Party (CCP) to further develop the manufacturing sector of China, issued by CCP general secretary Xi Jinping and Chinese Premier Li Keqiang's cabinet in May 2015. As part of the Thirteenth and Fourteenth Five-year Plans, China aims to move away from being the "world's factory"—a producer of cheap low-tech goods facilitated by lower labour costs and supply chain advantages. The industrial policy aims to upgrade the manufacturing capabilities of Chinese industries, growing from labor-intensive workshops into a more technology-intensive powerhouse.

<span class="mw-page-title-main">Automotive industry in Thailand</span> Auto industry Thailand

As of 2019, the automotive industry in Thailand is the largest in Southeast Asia and the 10th largest in the world. The Thai industry has an annual output of more than two million vehicles, more than countries such as Belgium, Canada, the United Kingdom, Italy, Czech Republic and Turkey.

Domestic-international dual circulation is a Chinese government strategy to reorient the country's economy by prioritizing domestic consumption while remaining open to international trade and investment. The first academic study on dual circulation defined it as "the domestic consumption-driven economic rebalancing to achieve sustainable economic development".

References

  1. "As worlds fastest-growing economy at 5.8%, India bright spot: UN economist". Business Standard. 2023-01-26. Retrieved 2023-01-28.
  2. "world bank: India seen fastest growing among 7 largest emerging & developing economies: World Bank". The Economic Times . Retrieved 2023-01-28.
  3. "India Big Beneficiary As Companies Move Towards "China Plus One" Strategy". NDTV.com. Retrieved 2023-01-28.
  4. "Latest News". Business Standard India. Retrieved 2023-01-28.
  5. "The development of the "China+1" concept in the US and the EU" . Retrieved 2024-04-26.
  6. "Vietnam: a promising option in light of the "China plus one" Strategy". Source of Asia. 2022-07-29. Retrieved 2023-01-28.
  7. Witchel, Start. "China Plus One" (PDF). Fti Journal. Philipa Symington.
  8. Collins, Robert; Block, Carson (2011-02-10). Doing Business in China For Dummies. John Wiley & Sons. p. 70. ISBN   978-1-118-05094-1.
  9. 1 2 Iida, Keisuke (2017-07-06). "6.8: China-plus-one at firm level; 6.9: American foreign direct investment in China". Japan's Security and Economic Dependence on China and the United States: Cool Politics, Lukewarm Economics. Taylor & Francis. p. 156. ISBN   978-1-317-31141-6.
  10. "How to Implement a "China Plus One" Strategy | Asia Briefing Events". www.asiabriefing.com. Retrieved 2020-05-26.
  11. "Should India be Your China Plus One?". India Briefing News. 2019-06-07. Retrieved 2020-05-26.
  12. Witchell, Stuart. "China Plus One" (PDF). FTI Journal.
  13. Enderwick, Peter. "A "China Plus One" Strategy: The Best of Both Worlds?". IOS Press. Auckland University of Technology.
  14. "China Plus One: Asia offers much more than just China". BCCJ Acumen. 2011-05-16. Retrieved 2020-05-26.
  15. "The China plus One Strategy in Vietnam – Latest Issue of Vietnam Briefing Magazine". Vietnam Briefing News. 2018-12-05. Retrieved 2020-05-26.
  16. "China Plus One in Practice". Fiducia Management Consultants. 2019-06-05. Retrieved 2020-05-26.
  17. Nellan, Amrietha. "The China Plus One Strategy: A Signal Of The Next Steps Of China's Economic Development" (PDF). The University of Arizona.
  18. 1 2 Shyam, Ashutosh (2020-04-30). "India Inc wants the sum of its parts to be 'China Plus One'". The Economic Times. Retrieved 2020-05-26.