The global narrative on China has been changing recently.
With the trade war going on, and with the focus on China’s poor environmental record, many companies are starting to look for alternatives to Chinese manufacturing.
In this blog post, you’ll discover what China-Plus-One is, and how it can help your company stay competitive in a changing landscape.
What is China-plus-one narrative?
The China-plus-one narrative persists in the U.S. and other China-dependent companies, according to the narration, which argues that China will be overtaken by India as the world’s top manufacturing hub in the future as companies have started looking for alternative sourcing destinations for their manufacturing requirements.
It is important to take note that companies are not avoiding China in any sense.
They are targeting a small percentage of the manufacturing and sourcing activities to be outside China.
This will help them to have a strategic manufacturing and sourcing partner to tackle complex supply chain issues.
On the other hand, China is experiencing a “demographic dividend” with more than 30 percent of its population under poverty and old age.
From electronics Giants like Samsung to Apple, to textile houses, hundreds of companies are setting up new manufacturing hubs in India and other neighbouring countries.
If we talk about the textile industry, the Chinese industry is going to lose up to 10% of their annual production rate.
This is a huge opportunity for countries like India to emerge as a friendly country and dominate the global market.
“India is expected to reach $65 billion in exports by 2026 if right actions from the industry majors and robust execution of government schemes”
The Rise of China as a Manufacturing Hub
China is the factory of the world. Most of the products that we use today are made in China.
At least it will have parts that were made in China.
The main reason for the rise of their power is the huge population.
China has the world’s largest population exceeding 1.4 billion out of which 700 million are working in the manufacturing sector.
On top of that, these workforces are highly trained, skillful, and productive.
With a large supply of workforce, the labor charges are naturally lower.
The workforce in China faces fierce competition which leads to low wages.
Low wages are essential in manufacturing low-cost goods.
The Chinese regulatory factors are also flexible allowing companies to decide the working hours and other conditions.
It is recorded that some people work as long as 16 hours a day, on some occasions.
Up until recently, the regulations on the environment were also negligible.
These factors are extremely suitable for growing manufacturing exponentially.
That is exactly why China became a manufacturing hub of the world.
During the early 1990s, in order to attract global investors, the Chinese government provided tax deductions and changes to its economic policies.
As a result of low tax rates and a friendly environment, they were able to attract large companies like Nike and Apple to China in the early days.
Why is China Plus One Narrative Growing?
In a post-COVID-19 pandemic world, most of the companies will try to move out of China.
But it will be extremely difficult for the companies to do so considering the huge investments in infrastructure and talent required to do so.
Rather than completely shifting out from China, companies are adopting China plus one narrative.
All the major products will now also have an alternative manufacturing hub outside of China.
They are being blamed for such a worse widespread pandemic.
The labor-intensive industries like toys, shoes, apparel, and others will see slight changes in the coming years.
The US companies especially will try to move away from China aggressively as the implementation of tariffs on China is higher due to the trade war.
Conclusions
China-plus-one means the Western world views China as the main world power, not America.
This narrative is growing in popularity, and there are many reasons for this.
It’s important to remember that China is an emerging economy with many issues to address, but they’re becoming more capable of doing so with each day.
The global narrative will continue to shift as time goes on, but China will always be included in it.
This will be an opportunity for countries like India, Bangladesh, Vietnam, Cambodia, etc.
Several of these countries are trying to woo companies to set up shop and move out of China with warm offers.
The technological industry, IoT and AI will move faster out of China than the others. In 5-6 years, China will not be the top manufacturer in the world.
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