China+1 strategy: Decoupling myth or diversification reality

Are global manufacturers truly leaving China, or simply hedging their bets?

- Sujatha Vishnuraj

We all will agree that for much of the past five years, the China+1 strategy has dominated boardroom conversations across global manufacturing. Triggered by the US–China trade war and accelerated by Covid-era supply chain disruptions, the idea appeared deceptively simple: reduce overdependence on China by adding at least one alternative production base. Yet, as factories have come up across India, Vietnam, Indonesia, and Mexico, the lived reality of China+1 has proved far more complex.

The central question confronting manufacturers today is not whether China+1 is happening, but what it actually represents. Is global manufacturing witnessing genuine decoupling from China, or merely pragmatic diversification layered onto an ecosystem that remains fundamentally China-centric?

Across EVs, automotive components, industrial manufacturing and supply chains, a consistent pattern is emerging. China+1, in its current form, is primarily a risk-mitigation strategy, not an exit strategy.

Structural relocation is taking place, but selectively, unevenly and within strict commercial boundaries.

Diversification, not decoupling, defines the current phase

Dr Uday Narang, Founder and Chairman of Omega Seiki Mobility, is direct in his assessment. “The China+1 movement is far more about pragmatic diversification than genuine decoupling—at least in the near to medium term,” he says. In sectors such as EVs, batteries, electronics, and power electronics, supply chains are deeply embedded in China’s manufacturing ecosystem, making a clean break is neither economically viable nor operationally realistic.