Over the past few decades, many companies worldwide have come to China, seeking a place to set up production bases and do business as they were lured by the country’s low labour costs and enormous domestic consumer market, allowing the country to become a global manufacturing hub. Illustrative image However, since around 2010, there has been a noticeable shift in foreign direct investment flow, which is called the ‘China plus one’ strategy. The phrase ‘China plus one’ refers to a strategy in which companies try to diversify risks of concentrating their manufacturing operations in China by opening factories in at least one country. The strategy has been around for many years as China has entered a phase of restructuring its economic growth model towards focusing more strongly on domestic demand, rather than boosting growth by exports and trade, and the country has gradually lost its comparative advantages from other Asian countries due to rising production costs, especially labour costs. At the end of 2018, the strategy was reactivated as investors sought to reduce risks caused by political tensions between China and the US, which originated from the tit-for-tat trade dispute. The risk of disruption of global supply chains has become… Read full this story
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