A ‘China-Plus-One' strategy: The best of both worlds?

Abstract

This paper offers a conceptual analysis of the widely discussed idea of a China-Plus-One strategy which refers to the practice of international businesses active in China coupling their investments with a second facility, generally in another Asian economy. The key finding is that a China-Plus-One strategy appears to be beneficial to both firms that seek to pursue it for reasons of risk diversification, cost reduction or avoidance of overreliance on China, for China in that it frees up resources which can be applied to other higher value activities, and for Plus-One host economies which gain the benefits of inward investment. The contribution of the article is in integrating a fragmented business literature, providing a coherent academic framework, in isolating direct and indirect impacts, in identifying the costs of a China-Plus-One strategy, and in integrating company examples. Testable propositions regarding the characteristics of firms more likely to pursue a China-Plus-One strategy are also developed.