How to Go About a China Plus One Sourcing Strategy

For importers who have built their businesses around Chinese manufacturing over the past two decades, the calculus has fundamentally changed. Between 2010 and 2020, China’s average yearly manufacturing wages increased by 169%, reaching 82,783 CNY ($12,798 USD) in 2020, transforming what was once the world’s low-cost manufacturing hub into a mid-tier option. Add escalating tariffs, geopolitical tensions, and supply chain resilience concerns, and the question becomes not whether to diversify, but how to execute a China Plus One strategy successfully.

China Plus One, also known as Plus One or C+1, is the business strategy of avoiding investing only in China and diversifying business into other countries, or channeling investments into manufacturing in other promising developing economies such as India, Thailand or Vietnam. Unlike abandoning China entirely, this approach maintains your established Chinese suppliers while adding manufacturing capacity in alternative locations—reducing risk without sacrificing the advantages China still offers.

If you’re sourcing mechanical parts, consumer goods, electronics, furniture, or garments and considering a China Plus One strategy, this guide provides the practical steps, realistic timelines, and risk mitigation strategies you need for successful implementation.

Understanding What China Plus One Really Means

The fundamental premise behind China Plus One is strategic diversification, not wholesale relocation. Organizations are aware that there is no single country that has the capabilities of China to replace it as the global manufacturing powerhouse. Your Chinese suppliers have developed expertise, supply chain relationships, and production systems over decades. Completely exiting China creates more risk than it solves for most businesses.

Instead, China Plus One means identifying which products, components, or production volumes make sense to shift to alternative countries while maintaining Chinese manufacturing for products where China still offers the best combination of quality, cost, and capability. A China-Plus-One strategy enables the firm to both retain a presence in the increasingly important Chinese market and simultaneously diversify production and cost structures.

For a mechanical parts importer, this might mean producing high-precision CNC components in China while shifting stamped metal parts to Vietnam. An apparel brand might keep complex technical garments in China while moving basic t-shirts and simple styles to Bangladesh. An electronics company could maintain motherboard assembly in China while establishing a secondary facility in Mexico for products serving the North American market.

Step 1: Conduct a Strategic Product Assessment

Before contacting suppliers in new countries, analyze your product portfolio to determine which items are candidates for relocation and which should remain in China.

Identify Products Most Affected by Tariffs

Start by calculating the total landed cost impact of current and projected tariffs on each product category. Items facing the highest duty rates become priority candidates for diversification. However, remember that if tariffs are the primary reason a company is planning a China plus one strategy, the organization should conduct a comprehensive analysis on the trade regulations and tariffs associated with the alternative low cost sourcing country they are considering manufacturing in—alternative countries may also face tariffs that reduce expected savings.

Assess Manufacturing Complexity

Products with simpler manufacturing processes transfer more easily to new suppliers in alternative countries. Complex products requiring specialized expertise, extensive supply chains, or sophisticated production equipment may need to remain in China until alternative manufacturing ecosystems develop sufficient capabilities.

For mechanical parts, basic machining operations transfer readily while precision tolerance requirements may necessitate staying with established Chinese suppliers. For garments, basic cuts and constructions move easily while technical fabrics and complex construction details may require more supplier development in new locations.

Evaluate Volume and Order Patterns

Products with stable, predictable demand and sufficient volume to justify tooling investments in multiple locations make better candidates for diversification. Low-volume specialty items or products with highly variable demand may not justify the fixed costs of establishing alternative suppliers.

Consider Supply Chain Dependencies

Products that rely heavily on Chinese component suppliers, raw materials, or subcontractors may not achieve expected benefits from diversification. The relocation of production capabilities is likely to be fragmented and piecemeal, with the production of certain products moving towards certain countries as determined by comparative advantage: Malaysia and Vietnam in electronics, Thailand in automobiles and packaged foods, Indonesia in machinery and petrochemicals.

Step 2: Research and Select Your Plus One Country

Choosing the right alternative manufacturing location requires balancing multiple factors against your specific product requirements and strategic priorities.

Evaluate Country-Specific Strengths

Different countries excel at different product categories based on their industrial development, workforce skills, and existing manufacturing infrastructure. Vietnam has emerged as a strong alternative for electronics assembly, footwear, and textiles. India offers capabilities in technical textiles, automotive components, and increasingly electronics. Mexico provides proximity advantages for North American markets and strength in automotive, aerospace, and consumer electronics. Thailand specializes in automotive manufacturing, processed foods, and electronics components.

For furniture importers, Vietnam has developed significant capabilities in wood furniture manufacturing with established supply chains for materials and components. For electronics, both Vietnam and Mexico offer viable alternatives depending on target markets. For garments, Bangladesh, Vietnam, and India all provide competitive options with different strengths in garment categories.

Assess Trade Agreement Benefits

Different countries offer varying tariff advantages based on trade agreements with your target markets. Vietnam has secured several free trade agreements including with the EU, UK, and participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, providing preferential market access. Consider how these trade agreements impact total landed costs compared to China-sourced products.

Analyze Infrastructure and Business Environment

Manufacturing capability alone doesn’t ensure supply chain success. Evaluate port infrastructure and shipping connections, logistics networks for domestic material movement, electrical power reliability and cost, internet connectivity and telecommunications, and ease of doing business including regulatory environment and bureaucracy.

In most cases, it is worth bringing on a consultant or organization with specific manufacturing and industry knowledge of the country you’ll be sourcing in. Professional guidance helps navigate unfamiliar regulations, business practices, and cultural differences that can derail diversification efforts.

Calculate Total Landed Cost Reality

Lower factory prices in alternative countries can be misleading if total landed costs actually increase. Build comprehensive cost models including unit price from factory, raw material and component sourcing costs, inland freight to port, ocean or air freight to destination, import duties and tariffs, inspection and quality control expenses, longer lead time carrying costs, and potential duty drawbacks or free trade zone benefits.

Step 3: Identify and Qualify Alternative Suppliers

Finding suppliers in new countries who can match the quality, reliability, and capabilities of your established Chinese partners requires systematic supplier qualification.

Source Potential Suppliers

Multiple channels help identify candidate suppliers including trade shows and industry exhibitions in target countries, industry associations and manufacturing directories, referrals from logistics providers or inspection companies with local networks, online B2B platforms with supplier verification, and purchasing missions or trade delegations.

For specialized products, work with sourcing agents or consultants with expertise in your product category and knowledge of the local manufacturing landscape.

Conduct Comprehensive Factory Audits

Never commit to a new supplier without thorough on-site verification of their capabilities. Supplier verification audits provide valuable insight into a supplier’s production capabilities and capacity, ensuring they can meet current and future demand. Professional factory audits should evaluate production capacity and equipment condition, quality management systems and documentation, technical capabilities for your specific products, workforce training and skill levels, and financial stability and business continuity planning.

Each Supplier Qualification Audit is unique, combining your specific requirements with audit checklists consisting of over 50 checkpoints. These audits verify that potential suppliers possess not just equipment, but actual capability to produce your products to specifications.

For mechanical parts, factory audits should verify measuring equipment calibration, process control capabilities, and machining tolerances the factory can reliably achieve. For electronics, assess ESD controls, component sourcing verification, and functional testing capabilities. For furniture, evaluate wood moisture testing, finishing quality controls, and packaging adequacy for international shipping. For garments, verify fabric inspection procedures, sewing machine maintenance programs, and metal detection systems.

Verify Production Capacity

Don’t rely on supplier claims about production capacity. Production capacity assessment ensures suppliers can meet current and future demand, helping organizations avoid potential bottlenecks or delays. Calculate realistic capacity based on number of production lines, working hours and shifts, employee count and skill levels, and equipment availability and condition.

Compare the supplier’s current production load against their stated capacity. Factories operating at full capacity cannot absorb your orders without displacing existing customers or requiring capital investment in additional equipment.

Request and Evaluate References

Ask potential suppliers for references from current customers, particularly those in your product category. Contact these references to inquire about quality consistency, on-time delivery performance, responsiveness to issues, and willingness to invest in improvements.

Be cautious of suppliers who cannot or will not provide verifiable customer references.

Step 4: Implement Phased Production Transitions

Rushing a China Plus One strategy typically leads to quality problems, delivery failures, and disappointed customers. A correctly implemented China Plus One strategy should lead to cost savings, but companies need to invest time in finding new suppliers, making sure they meet regulatory and trade compliance needs, and better understanding the new risks and advantages that come with a new location.

Start with Pilot Programs

Begin with small test orders for selected products rather than immediately shifting significant volumes. Initial pilot programs allow you to validate supplier capabilities with limited risk, identify quality issues before they affect major shipments, develop communication and workflow patterns, and build confidence in the new supplier’s performance.

For mechanical parts, start with less critical components before transitioning parts with tight tolerances or safety implications. For garments, begin with basic styles before attempting complex constructions or technical fabrics. For electronics, test with lower-value products before shifting flagship models.

Maintain Parallel Production During Transition

Never fully exit your Chinese supplier until your alternative supplier has demonstrated consistent capability over multiple production cycles. Maintain dual sourcing during the transition period with your Chinese supplier producing full volumes while new suppliers ramp up, placing orders with both suppliers to maintain leverage and options, gradually shifting percentages as confidence in the new supplier builds, and keeping Chinese suppliers as backup capacity even after successful transitions.

This conservative approach costs more short-term but prevents catastrophic supply disruptions if new suppliers cannot perform as expected.

Invest in Supplier Development

New suppliers in alternative countries often require support to meet your quality standards and production requirements. Ensuring consistent product quality demands meticulous monitoring, testing, and compliance efforts across multiple manufacturing locations. Allocate resources for providing detailed technical specifications and quality requirements, training on inspection procedures and acceptance criteria, initial sample approval and correction cycles, and potential investment in tooling, fixtures, or testing equipment.

The upfront investment in supplier development accelerates capability building and creates stronger long-term partnerships.

Step 5: Establish Robust Quality Control Programs

Quality control becomes exponentially more critical when operating in multiple countries with varying manufacturing cultures, standards, and capabilities.

Implement Comprehensive Inspection Programs

Professional third-party inspection services provide independent verification across all your manufacturing locations. Establish inspection protocols including first article inspections before mass production to validate samples, during production inspections to identify issues when corrections are less expensive, pre-shipment inspections using appropriate AQL sampling methodology, and container loading supervision to prevent damage and shortage.

Companies like QIMA, Pro QC, HQTS, and V-Trust maintain global inspector networks capable of providing consistent quality verification across China and alternative manufacturing countries. Using the same inspection provider across all locations creates standardized quality assessment and comparable data.

Develop Product-Specific Quality Specifications

Don’t assume suppliers in new countries understand your quality expectations. Create detailed quality control specifications with clear visual standards for acceptable vs unacceptable defects, measurement tolerances with specific numeric criteria, testing procedures suppliers must perform, and acceptance criteria aligned with AQL standards appropriate to your product.

These specifications become the foundation for training both supplier quality teams and independent inspectors.

Monitor Comparative Performance

Track quality metrics across all suppliers to identify performance gaps and improvement opportunities. Compare defect rates between Chinese and alternative suppliers, analyze types of defects occurring in each location, measure responsiveness to corrective action requests, and evaluate packaging and shipping damage rates.

Use this data to direct supplier development resources toward the locations and issues offering the greatest improvement potential.

Managing Risks and Common Challenges

Every China Plus One strategy faces predictable challenges. Proactive risk management minimizes disruptions during the transition.

Cultural and Communication Differences

Business practices, communication styles, and cultural expectations vary significantly across manufacturing countries. What worked with Chinese suppliers may not translate directly to Vietnamese, Indian, or Mexican partners. Invest in cultural training for sourcing teams, establish clear communication protocols and schedules, account for language barriers with translated documentation, and recognize that trust-building timelines differ across cultures.

Extended Lead Times and Logistics

Diversifying manufacturing typically extends lead times and complicates logistics. Alternative countries may have fewer shipping options, longer transit times, or less developed transportation infrastructure. Build buffer inventory during transition periods, communicate extended lead times to customers, adjust reorder points and safety stock levels, and develop relationships with freight forwarders experienced in your new sourcing countries.

Intellectual Property Protection

IP protection varies across manufacturing jurisdictions. When moving to new countries, register trademarks and patents in destination countries, use legal agreements with clear IP ownership provisions, limit proprietary information sharing to what’s necessary, consider splitting production across suppliers for sensitive products, and conduct regular audits to prevent unauthorized production.

Supply Chain Complexity

Operating in multiple countries increases supply chain complexity and management overhead. When a supply chain spans multiple countries, production and logistics vary significantly, requiring careful examination of infrastructure availability and quality. Implement supply chain management systems to track orders across locations, establish clear responsibility for coordination and communication, develop contingency plans for supplier failures or disruptions, and maintain visibility into inventory levels across all manufacturing locations.

Realistic Timelines: Patience Required

Perhaps the most important message about China Plus One strategies: this process cannot be rushed. For Apple, it might take 8 years to move only 10% of production away from China. Even major corporations with substantial resources find diversification takes years, not months.

Realistic timelines for implementing China Plus One strategies include three to six months for supplier identification, vetting, and selection, six to twelve months for tooling development, sampling, and initial production, twelve to eighteen months for production ramp-up and process refinement, and eighteen to thirty-six months for achieving stable, mature alternative supply chains.

Companies expecting to execute China Plus One strategies in a few quarters will face disappointment. Those planning multi-year programs with realistic milestones set themselves up for success.

Conclusion: Building a Resilient Multi-Country Sourcing Strategy

A well-executed China Plus One strategy doesn’t abandon China—it strategically reduces concentration risk while leveraging each country’s comparative advantages. 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, but China remains crucial for many product categories.

Success requires strategic product assessment to identify relocation candidates, careful country selection aligned with your products and markets, thorough supplier qualification through professional factory audits, phased implementation with parallel production during transitions, comprehensive quality control across all manufacturing locations, and realistic expectations about timelines and investment required.

Most importantly, implement professional quality assurance programs to ensure diversification doesn’t sacrifice the product quality your customers expect. Independent inspection services and factory audits provide the verification and accountability that makes multi-country sourcing successful.

The companies thriving in the current trade environment treat China Plus One as a long-term strategic initiative rather than a panic response to current tariffs. Start with honest assessment of your current situation, develop phased implementation plans with realistic timelines, and invest in the quality infrastructure necessary to manage increased supply chain complexity.