Your project is unique? Let’s talk about it!

Please share with us some details, a SOA expert will get back to you to discuss it in person!

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Almost there! Last step to be part of the journey:

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Apply this position

"*" indicates required fields

Accepted file types: jpg, gif, png, pdf, doc, docx, Max. file size: 2 MB.
Accepted file types: jpg, gif, png, pdf, doc, docx, Max. file size: 2 MB.
This field is for validation purposes and should be left unchanged.

1. What is China +1 Strategy?

The China Plus One Strategy (“C+1”), is a business strategy which encourages investors to diversify their investments by not only investing in China, but opting for a more diverse portfolio through investments in a variety of ASEAN countries. C+1 is becoming more and more relevant as businesses are looking to diversify their supply chains.

2. Reinforcement of the current diversification strategy

a) Social & demographic changes in China
Vietnam and the China Plus One Strategy for supply chain

The wake of China’s industrialization was a poor one with low wages dominated by agriculture. Over time, as China developed, more and more industries bloomed causing a drastic change in the standards of living. Production costs, notably wages, increased significantly compared to other Southeast Asian countries such as Vietnam or Cambodia.

China’s ageing population paired with a large number of retiring workers were key factors in the development of the C+1 strategy. The one-child policy created a manpower shortage unable to replace its ageing population. According to China’s National Bureau of Statistics, in 2013, the population decreased by 2.4 million. This decline was an important factor in the rise of labour costs.

b) US-China trade war / EU-China tensions

US-China trade war

Vietnam: a promising option in light of the China Plus One Strategy

In 2018, the US government placed tariffs on hundreds of billions of dollars’ worth of Chinese goods, China did the same in return. Costs of products and parts from China soared, leading businesses to look for alternative countries. Vietnam became one of the top beneficiaries of this situation. Imports from Vietnam to the US went from US$ 49.1 billion in 2018 to US$ 66.5 billion in 2019 — a 35% YOY increase.

Political tensions with the EU

The Uyghur situation in China brought the EU in march 2021 to impose sanctions against Chinese personalities from the Xinjiang region. Visa cancellations and residence bans were promulgated. The United Kingdom and the United States followed suit. China immediately fought back by applying similar sanctions.

c) Covid-19 Pandemic

No one was prepared to manage the epidemic. Businesses have been impacted all around the world in every country. Today, as the situation continues to improve, businesses around the world re-evaluate their strategies to avoid high dependencies on single countries. China’s “Zero-Covid” strategy has significantly impacted its local supply chains which further supports the search for greater diversification.

The Covid-19 crisis has accelerated China’s decentralisation of low-cost industries in South East Asia.

Foreign investors increased the diversification of their supply chain in

  • Indonesia for the information and communication industry
  • Malaysia for the electrical and electronics industry
  • Thailand for electronics and automotive manufacturing
  • Vietnam for low-tech electronic components manufacturing

3. Vietnam, the best option in the China Plus One Strategy

Conveniences of Vietnam Improvement items

Governments offer incentive policies thanks to Economic Zones or competitive taxations.

Labor cost and geographic position of Vietnam are also valuable


There is less supplier density and quality in Vietnam compared to China.

Lower infrastructure and labour quality than in China.


Upcoming upgrade in its China+1 position Caution Zones
Vietnam is likely to contract news FTAs Wage inflation and infrastructure quality can impact Vietnam’s position in China+1 strategy


a) Benefit from the Vietnam labor market

Vietnam is one of the most competitive labour markets in Southeast Asia.

A table comparing wages in Vietnam compared to neighbouring countries: 

Vietnam 4 different wages
Region 1 Region 2 Region 3 Region 4
Includes the urban and suburban areas Rural areas Smaller cities and suburban districts All remaining areas


Hanoi, Hai Phong, Ho Chi Minh City, and the provinces of Dong Nai, Binh Duong, and Ba Ria – Vung have Hanoi and Ho Chi Minh City and medium-sized cities like Da Nang, Nha Trang, and Can Tho
Minimum monthly wage:

USD 189

Minimum monthly wage:

USD 168

Minimum monthly wage:

USD 147

Minimum monthly wage:

USD 131

Average wages in other South East-Asia countries
Malaysia Thailand Indonesia Cambodia
USD 270 to

USD 295

USD 248 to

USD 265

USD120 to

USD 298

Minimum wage:

USD 190

Sources: China Briefing | Cekindo

b) Easier shipping thanks to China proximity

Vietnam’s proximity to China is an important bonus. This proximity favors its attractiveness as a China plus one destination.

For example, Hai Phong is 537 miles away from China’s manufacturing hub of Shenzhen, much closer than alternatives such as Bangkok in Thailand (1,708 miles), Phnom Penh in Cambodia (1,716 miles), Kuala Lumpur in Malaysia  (1,879 miles) or Jakarta in Indonesia (2,050 miles).

By localising factories close to traditional hubs in mainland China, investors can optimise manufacturing costs while limiting interruption or delays to current supply chains.

c) Preferential industry-based taxation in Vietnam
Vietnam and the China Plus One Strategy for supply chain

Source: Cekindo

d) Vietnam’s network of trade agreements, one of its most valuable assets in China+1 situation.

Since its birth, Vietnam’s economy has adopted an open approach to business. Vietnam’s trading partners in FTAs represent 56 economies. Bilateral and multilateral agreements have led Vietnamese companies to develop regionally and globally.

As a result, Vietnam’s export turnover has significantly increased during the last few years.

Vietnam: a promising option in light of the China Plus One Strategy

Source: Asia Business Consulting

Foreign investments are boosted by FTAs. In 2006, FDI in Vietnam reached 5 billion dollars. In 2019, they peaked at 20,38 billion dollars (+6,7% compared to 2018). 20% of Vietnam’s GDP is originated by FDIs.

FTAs are key drivers in the country’s development, from economic growth and transition to improving intellectual and material life in Vietnamese society. They tend to positively influence business transparency and the investment environment.

Last but not least, these agreements suppress tariff barriers bringing Vietnam to become a potential supply chain strategic hub in a China + 1 scenario. This is a real win-win strategy for both Vietnam and companies looking to adopt this strategy.

Amongst the numerous FTAs, we can highlight:

  • Member of ASEAN and part of the economic bloc’s free trade zone
  • Member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP. (includes 10 other countries, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, and Singapore).
  • ASEAN-China FTA, the ASEAN-India FTA, the Vietnam-South Korea FTA, and the Vietnam-Eurasian Economic Union FTA.
  • Recently, UKVFTA came into effect (United Kingdom and Vietnam Free Trade Agreement)
  • Finally, the European Union Vietnam Free Trade Agreement (EVFTA), which will be completed with an EU-Vietnam Investment Protection Agreement (EVIPA) aiming to protect investors in the EU and Vietnam.
Vietnam and the China Plus One Strategy for supply chain

APEC : Asia-Pacific Economic Cooperation

VEGETA : Vietnam Eurasian Union FTA

EU : European Union

CPTTP : Comprehensive and Progressive Agreement for Trans-Pacific Partnership

ASEAN : Association of Southeast Asian Nations

RCEP: Regional Comprehensive Economic Partnership

FTA with the United States Agreements in Force

Singed Agreements Negotiations ongoing

* The EU’s FTA with South Korea has been finalised; its FTAs with Vietnam and Singapore have been concluded, but not yet entered into force.

** ASEAN has multilateral trade agreements with India, China, New Zealand, Australia, Japan, and South Korea; ASEAN’s trade agreement with Hong Kong has been concluded, but not yet entered into force.

e) Direct investors drawn in by Vietnam Key Economic Zones

Vietnam’s 3 Key Economic Zones are the privileged FDI destinations for the country in a China Plus One strategy. These Key Economic Zones are located in the north (NKEZ), centre (CKEZ) and south (SKEZ) of the country.

They benefit from tax incentives to attract foreign and/or domestic investors.

However, investors wishing to set up in these zones must be aware of the singularity of each zone.

Below is a table summarising Vietnam’s Economic Zones.

Key provinces of each zone Bac Ninh, Hai Duong, Hai Phong and Hanoi Quang Ngai, Hue, Da Nang Long An, Binh Duong, Dong Nai and Ho Chi Minh City
Pros Close proximity to China, reducing logistics costs for imports from China Low costs, encourages clean energy to settle,Large land availability Diversified supply base and close proximity to the rest of Southeast Asia
Cons Less diversified, labor force, and industries than the SKEZ Still a lack of infrastructure and technology industry players Congested logistic networks
Investment Strategy Companies seeking to quickly relocate operations and seeking high level of integration with Chinese supply chains Companies seeking low costs, long term investment strategy, and willing to relocate majority of Supply Chain over time Companies seeking to diversify its supply chain and distribution network, companies interested in targeting the domestic market

Sources: Vietnam Briefing 

4. Final thoughts

The “China Plus One” strategy is not a new concept.

Major companies have already changed and diversified their supply chain worldwide. Global leading companies such as Nike have made the leap more than a decade ago. In August 2021, 41% of Nike workers were based in Vietnam compared to 13% in China. Diversified production allows the capacity to be more agile and not dependent on a single country.

Recent events have accentuated the China + 1 trend.  Factors such as China’s demographic, social and political evolutions, the country’s tensions with important players leading globalisation (USA and EU) and the Covid-19 crisis and global supply chains with China at its center have been disrupted supporting the China Plus One strategy.

This does not mean that the world will turn its back on China. Advanced logistics, high productivity, and manufacturing expertise in many sectors are still major players in China.

The Plus One Strategy’s main aim is to diversify supply chains to get rid of high dependencies, no matter the location, no matter the industry.

The C+1 strategy brings many Southeast Asian countries in the radar of the global supply chain.

With the country’s numerous assets, Vietnam has the resources to play an important part of this movement.