The “China Plus One” (C+1) strategy refers to a diversification approach adopted by businesses to reduce reliance on China as a manufacturing and supply chain hub. Under this strategy, companies maintain a strong presence in China but establish operations in at least one other country to mitigate risks associated with over-dependence on China.
Drivers of the C+1 Strategy
Trade Tensions: Escalating trade wars, especially between the U.S. and China, have made companies cautious about relying solely on China.
Geopolitical Risks: Concerns about political instability, regulatory unpredictability, and strained diplomatic relations involving China.
Rising Costs: Labor and operational costs in China have been increasing, pushing companies to explore cost-competitive alternatives.
Supply Chain Disruptions: Events like the COVID-19 pandemic and associated lockdowns exposed vulnerabilities in concentrated supply chains.
Regulatory Pressures: Governments and businesses are encouraging a shift from China to diversify global production.
Key Destinations for “Plus One”.
Countries in South and Southeast Asia are among the top beneficiaries of this strategy, offering cost-competitive environments, favourable trade policies, and geographical proximity to China. These include:
Vietnam: Strong manufacturing base, trade agreements, and proximity to China.
India: Large workforce, growing infrastructure, and government incentives for foreign investment.
Thailand: Well-developed logistics and supply chain networks.
Malaysia, Indonesia, and the Philippines: Emerging hubs with improving manufacturing capabilities.
Benefits of the C+1 Strategy:
Risk Mitigation: Reduces the impact of disruptions like tariffs, sanctions, or natural disasters.
Cost Optimisation: Allows companies to capitalise on lower operational costs in emerging markets.
Market Diversification: Expands access to other growing economies in Asia and beyond.
Resilience: Builds a more robust and flexible supply chain.
Challenges
Logistical Complexity: Managing multi-country operations can complicate supply chain logistics.
Infrastructure Gaps: Emerging countries often need more of China’s sophisticated infrastructure.
Skilled Labour Availability: Matching China’s manufacturing expertise may be challenging.
Policy and Bureaucratic Hurdles: Alternative countries’ regulatory environments may need more stability and efficiency.
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My Article published on the Indus International Research Foundation website on 14 Nov 24.
Inflation, public debt, and geopolitical tensions have shaped recent strategic economic policies. Governments are taking a cautious approach to monetary policies to gradually ease inflation, ensure fiscal sustainability, and promote economic growth. Internationally, the financial focus has increasingly turned to fostering resilience through reshoring, friend-shoring, and decoupling trade policies that diversify supply chains amid shifting global dynamics. In response to the fragility revealed during the pandemic and recent geopolitical tensions, nations are incentivising local and allied-country manufacturing to reduce reliance on single sources like China. These strategic shifts aim to fortify economies against future disruptions.
Strategic Economic Policies.
Strategic economic policies are initiatives and frameworks that governments use to shape their national economy in ways that promote long-term goals, enhance competitiveness, safeguard critical industries, and adapt to global economic shifts. These policies address specific economic, social, and political objectives, often encompassing trade, technology, workforce development, and environmental sustainability. These include:-
Industrial Policy. Support for critical industries, such as renewable energy, semiconductors, or biotech, often through subsidies, tax incentives, or direct government investment. These policies aim to foster innovation and secure leadership in high-growth sectors.
Trade Policy. Tariffs, trade agreements, and export controls can protect domestic industries, open new markets, and safeguard national interests. Trade policy also includes mechanisms like friend-shoring and decoupling to strengthen alliances and reduce dependencies on rivals.
Innovation and R&D Policy. Government funding and tax incentives for research and development can accelerate technological advances and maintain a competitive edge in AI, 5G, and green tech sectors.
Workforce Development and Education. Investing in education and workforce training aligns skills with market needs, addressing tech, healthcare, and manufacturing gaps. This boosts employment and productivity in strategic industries.
Sustainability and Environmental Policy. Incentives for renewable energy, carbon taxes, and green investments are designed to transition the economy towards sustainability, address climate change, and capture economic benefits from emerging “green” industries.
Infrastructure Investment. Strategic investments in transportation, digital infrastructure, and energy grids support productivity and resilience. Recently, emphasis has grown on building secure digital infrastructure, including 5G networks and cyber security.
Capital and Investment Policy. Policies to attract foreign direct investment (FDI) in strategic sectors while protecting sensitive areas from foreign control, such as financial regulations or screening of FDI in national security sectors.
Strategic economic policies are especially significant in facing challenges like globalisation, geopolitical competition, and technological disruption. They allow governments to take proactive measures that guide their economies toward resilient and sustainable growth.
Reverse Globalisation
“Reverse globalisation” refers to a slowdown or reversal of globalisation trends, where countries move away from increased international integration and, instead, emphasise national and regional independence. This shift is often driven by political changes, economic protectionism, supply chain disruptions, or cultural movements against global homogenisation. Several influences encourage reverse globalisation.
Economic Nationalism. Countries may favour domestic industries over foreign competition through tariffs, subsidies, or trade restrictions. Examples include the U.S.-China trade war and the push for “Made in [Country]” policies to boost local economies and jobs.
Supply Chain Reconfiguration. Recent supply chain vulnerabilities, especially highlighted during the COVID-19 pandemic, have driven companies to “reshore” or “nearshore” manufacturing. This shift is often motivated by the need for resilience and security rather than solely cost efficiency.
Immigration and Labour Policies. Reverse globalisation often includes stricter immigration policies, as seen in countries aiming to prioritise local employment. Countries might enact more stringent visa policies or limit foreign workers to reduce reliance on global labour.
Digital and Information Sovereignty. Reverse globalisation also affects technology and information policies, with countries creating data localisation laws and internet restrictions to safeguard digital sovereignty. Examples include China’s Great Firewall, the EU’s GDPR, and India’s data localisation requirements, all of which attempt to control information flows.
Political Populism and Nationalism. A rise in nationalism and populist politics has fuelled reverse globalisation. Leaders who emphasise “taking back control” often support policies that reduce international dependencies. Brexit is a prime example; the UK voted to leave the EU, a move partially driven by nationalist sentiments.
Environmental Concerns and Localism. Environmental movements argue that reducing global trade can lower carbon emissions by minimising the need for long-distance shipping and production. This has led to a push for local sourcing and sustainable production practices, sometimes aligning with anti-globalisation ideals.
Reverse globalisation reflects a complex recalibration rather than a complete abandonment of globalisation. The world remains interconnected in many essential ways, but often with a renewed focus on autonomy and resilience.
Recent Strategic Economic Policies
Recent economic policies indicate a broader trend toward economic resilience and diversification, with long-term strategies to sustain growth amidst uncertainty. Decoupling, friend-shoring and reshoring are strategic economic policies that reduce reliance on nations viewed as strategic competitors, especially in high-stakes areas like technology, energy, and critical supply chains.
Decoupling. “Decoupling” refers to reducing or severing economic interdependence between countries, particularly with rivals, to avoid vulnerabilities. It often focuses on critical industries like technology, energy, and defence. For example, in recent years, the U.S. and some of its allies have sought to decouple parts of their technology supply chains from China. This may involve encouraging companies to source components or raw materials from domestic or allied suppliers rather than potential strategic rivals. Decoupling involves measures like:-
Restricting Technology Transfer. Limiting the export or sharing of technology could enhance a competing nation’s capabilities.
Diversifying Supply Chains. Shifting manufacturing and sourcing from a competitor country to other nations or domestic markets often involves “friend-shoring.”
Restricting Investments. Regulating or prohibiting investments in specific sectors or companies within another nation.
Reshoring. Reshoring brings manufacturing and production activities back to a company’s home country or a region closer to home. This trend has gained traction recently as companies and governments seek to reduce their dependence on distant foreign suppliers, especially after the COVID-19 pandemic exposed vulnerabilities in global supply chains. Concerns about trade tensions, geopolitical risks, and the drive to secure critical industries (like semiconductors and pharmaceuticals) have further fuelled the reshoring movement. Key motivations for reshoring include supply chain resilience, local economic Incentives, better labour and quality control, sustainability, and consumer demand. For example, several countries are enacting policies to bolster semiconductor manufacturing domestically.
Friend-shoring. “Friend-shoring is an economic and trade strategy in which countries or businesses shift production and sourcing to nations with similar political values or solid diplomatic relations rather than relying on countries with potential geopolitical or economic conflicts. The goal is to enhance supply chain security, reduce reliance on politically unstable or adversarial regions, and build resilience by working with reliable partners. “Friend-shoring” is a more collaborative approach, aiming to secure critical supply chains by relocating them to nations with shared values or alliances. The idea is to build resilient networks within trusted partner countries to reduce risks from unpredictable or adversarial states. For instance, nations might establish manufacturing facilities or resource procurement operations in allied countries, creating a network of trade partners that align economically and politically. This strategy has gained traction as global supply chains have faced challenges from trade disputes, the COVID-19 pandemic, and regional tensions. It’s a middle ground between total globalisation and complete “reshoring” (bringing production back to the home country), allowing countries to balance security concerns with cost efficiency by collaborating with allied nations.
Nearshoring. Nearshoring is a strategy where companies relocate their manufacturing or services closer to their primary market, often to neighbouring countries. This approach has gained traction due to its potential benefits and strategic advantages. By positioning suppliers closer to consumers, businesses can significantly shorten delivery times. This improves customer satisfaction and enhances inventory management by decreasing the time products spend in transitNearshoring can lead to reduced logistics and transportation costs, especially when compared to distant locations like China. Proximity allows companies to minimise shipping expenses and inventory holding costs. Many nearshoring destinations offer access to a skilled and competitive labour force. The workforce is generally well-trained and capable of meeting production standards, which can be crucial for maintaining quality while reducing costs. Nearshoring also helps diversify supply chains, reducing reliance on a single location. This is particularly important in times of geopolitical tensions or natural disasters.
Decoupling aims to safeguard national security, protect sensitive industries, and reduce exposure to risks posed by economic interdependence with rival nations. However, the complex process can have widespread economic implications, affecting trade, innovation, and global supply chain resilience. Reshoring, friend-shoring, and nearshoring offer a compelling alternative to traditional offshore manufacturing. They reflect a broader trend toward regionalising supply chains and securing economic independence in an increasingly uncertain global landscape. These policies reflect a wider shift toward financial security and strategic resilience, prioritising political and security considerations in trade and supply chain decisions.
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Schneider-Petsinger Marianne, “The New Era of Reglobalisation.” Chatham House, 2023.
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Information and data included in the blog are for educational & non-commercial purposes only and have been carefully adapted, excerpted, or edited from reliable and accurate sources. All copyrighted material belongs to respective owners and is provided only for wider dissemination.
My Article Published on The EurasianTimes Website on 07 Nov 24.
Donald Trump’s return will have many implications for India regarding economics, security, and global alignments. Trump is more of a businessman and generally favours bilateral trade deals over multilateral ones. He may advocate a more transactional approach in his second tenure, focusing on trade deficits. His previous administration’s tariff policies targeted many trading partners, including India, which saw increased duties on certain exports. India might face pressure to expand its markets to American goods, particularly in the agriculture, pharmaceuticals, and technology sectors. Trump’s previous immigration policies impacted the H-1B visa program, which disproportionately affected Indian workers in the tech sector. A return to these policies could limit Indian talent mobility, impacting both individuals and companies. India’s IT sector might find the U.S. less accessible for skilled migration, though Trump has sometimes indicated support for highly skilled immigration.
Security Repercussions for India
Trump’s “America First” approach sometimes means stepping back from global commitments, including military engagements abroad. If the U.S. were to reduce its military presence in Asia, this could shift greater responsibility to regional players. While India is enhancing its military capabilities, a significant U.S. pullback from the region could embolden China or other adversarial forces, increasing security pressure on India. India’s security landscape will be affected in several ways, especially concerning regional stability, defence partnerships, and counterterrorism.
Increased Demand for Strategic Alignment with the U.S. A Trump victory could mean heightened expectations for India to align with U.S. policies in the region, which could be at odds with India’s traditionally non-aligned stance. India might face pressure to take more decisive stances on issues like Taiwan, South China Sea disputes, and participation in regional blocs led by the U.S. India may have to weigh its economic and diplomatic ties with other countries, particularly Russia, against the U.S. demands for closer alignment.
China-India-U.S. Dynamics. Trump’s “Indo-Pacific” strategy strongly focuses on containing China, and a second term would likely deepen this agenda, intensifying U.S.-China competition. India would likely be asked to take a more assertive role in regional security, particularly in the Indian Ocean. While India could benefit from U.S. support in balancing China’s influence, it also risks being pulled into a more intense, potentially destabilising rivalry, which might strain its resources and complicate diplomatic relations with China.
Impact on the Quad Alliance. Trump has supported the Quad (U.S., India, Japan, and Australia), seeing it as a counterweight to China’s influence. His re-election could lead to an expanded Quad agenda, including more security collaboration in the Indian Ocean and South China Sea. This might benefit India’s strategic standing but could also draw it into more confrontation with China. The Quad’s increased visibility may create additional security risks, with China potentially reacting aggressively in the region, impacting India’s borders and maritime security.
Pakistan Policy. Trump previously adopted a tough stance on Pakistan, particularly regarding terrorism financing and harbouring militant groups that target Afghanistan and India. He may again apply pressure on Pakistan to dismantle terrorist networks. This would align with India’s security goals, potentially reducing cross-border terrorism. However, any diplomatic tension between the U.S. and Pakistan could destabilise, making Pakistan lean more heavily toward China and impacting India’s security environment.
Afghanistan’s Security Dynamics. Trump had strongly advocated withdrawing U.S. forces from Afghanistan. While a complete withdrawal has already taken place, his potential re-election could mean a lack of further U.S. engagement in Afghan stability, especially in containing Taliban and extremist groups. For India, this would mean facing an increasingly Taliban-influenced Afghanistan, leading to higher security risks, especially if terror groups resurge in the region.
Repercussions on Military Cooperation
Trump’s administration fostered strong defence cooperation with India as part of a broader Indo-Pacific strategy to counterbalance China’s growing influence. However, Trump’s unpredictable alliance approach could lead India to exercise caution. The repercussions on military cooperation between the U.S. and India could be multifaceted, introducing new strategic dynamics.
Strengthened Defence Partnership. Trump’s administration previously prioritised India as a significant defence partner within the Indo-Pacific framework. A second term could intensify military cooperation. India may receive advanced technology and intelligence sharing, and joint exercises could increase frequency and complexity. However, this could also increase India’s security obligations in the Indo-Pacific, putting it on the front lines of any U.S.-China friction in the region.
Enhanced Defence Technology and Arms Transfers. Under Trump, the U.S. could prioritise India as a key buyer of advanced defence equipment, including drones, anti-missile systems, and surveillance technology. India has acquired U.S. assets like C-17 heavy lift aircraft, C-130 Special operation aircraft, Apache attack helicopter, Chinook heavy lift helicopter, and P-8I Poseidon surveillance aircraft. A second Trump term might accelerate such sales, particularly if the U.S. encourages India to purchase high-tech systems that enhance its capabilities against China.
Military Modernisation. Trump’s administration previously pushed for arms deals with India, and a second term could further expand India’s access to U.S. military technology. This could accelerate India’s modernisation efforts, potentially providing advanced systems and technologies. Trump’s administration might push for more defence manufacturing in India through programs like “Make in India.” The U.S. could support joint ventures and technology transfers to Indian companies, allowing India to produce components of high-tech defence systems locally. While this would strengthen India’s defence manufacturing sector, there might be strings attached, with the U.S. expecting greater access to India’s defence markets and influence over India’s arms export policies.
Counterterrorism and Intelligence Sharing. Trump’s stance on counterterrorism aligns with India’s interests, and military cooperation could extend to enhanced intelligence-sharing agreements. The U.S. has been a critical partner in sharing counterterrorism intelligence with India, which helps prevent potential terrorist attacks. India’s counterterrorism efforts could be bolstered if Trump maintains or deepens intelligence sharing. However, if his administration decides to limit or privatise specific intelligence-sharing mechanisms, India might face challenges acquiring timely information.
Cyber security and Space Warfare Collaboration. Trump has shown interest in cyber defence and space as critical domains of warfare. Cooperation in these fields could deepen under his presidency, with the U.S. assisting India in building its space-based surveillance and cyber security capacities. This could help India counter cyber threats from adversaries like China and strengthen satellite surveillance of sensitive border areas. However, tighter coordination in these domains might push India further into the U.S. strategic orbit, affecting its autonomy in setting space and cyber policies.
Joint Military Exercises and Training. Military exercises like the Malabar naval drills have seen increased engagement from all Quad members (U.S., India, Japan, and Australia), aiming to boost interoperability among the forces. With Trump in office, India may face opportunities for more profound joint training and exercises, extending into new domains like cyber and space warfare.
Conclusion. Trump’s second tenure could bring some alignment on shared geopolitical interests but might introduce new uncertainties, especially in trade and immigration policies. It could deepen the relationship between the U.S. and India regarding strengthened defence cooperation and intelligence, enabling India to access advanced defence technologies and participate more actively in joint exercises. However, India might face growing expectations to align with U.S. policies in Asia, potentially narrowing its strategic autonomy and requiring it to manage and navigate a delicate and complex regional security landscape. India must weigh these factors carefully, balancing cooperation with the U.S. against its regional interests.
Your valuable comments are most welcome.
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Information and data included in the blog are for educational & non-commercial purposes only and have been carefully adapted, excerpted, or edited from reliable and accurate sources. All copyrighted material belongs to respective owners and is provided only for wider dissemination.
