The global business landscape is undergoing a structural shift. More organisations are moving beyond single-country manufacturing and adopting the China Plus One (C+1) strategy — keeping their core operations in China while adding production or sourcing capacity in a second country to manage risk, reduce costs, and respond to fast-changing trade policies.
For Hong Kong businesses, sitting at the crossroads of Asia's supply chains, this shift creates both urgency and opportunity. This guide covers everything you need to know, from choosing your Plus One destination to managing customs compliance and tracking shipments across multiple hubs — with practical support from DHL Express.
The China Plus One (C+1) strategy is a business approach where companies maintain their primary manufacturing or sourcing operations in China while establishing at least one additional base in another country — typically in Southeast Asia — to reduce supply chain risk, lower production costs, and navigate shifting trade policies.
In 2026, many businesses have evolved beyond the traditional C+1 model to adopt a "Plus X" approach — building multiple secondary hubs across different countries simultaneously, such as Vietnam for electronics assembly, India for large-scale manufacturing, and Malaysia for tech components. Rather than a single backup location, Plus X creates a fully distributed supply chain network that spreads risk across multiple markets at once.
Three structural forces are driving Hong Kong businesses to diversify their supply chains now:
Tariff instability is now the top concern for businesses running Asia-based supply chains — and for good reason.
Southeast Asia is no longer just a cost play — it has become the world's fastest-growing manufacturing destination.
Beyond risk management, the cost case for China Plus One is equally compelling.
The China Plus One strategy creates distinct opportunities across Hong Kong's three most strategic sectors:
Electronics remains one of Hong Kong's most significant export sectors and stands to benefit directly from supply chain diversification.
As one of the major contributors to its economy, this industry can benefit significantly from diversifying manufacturing and sourcing to other countries in the region. This can help alleviate risks associated with over-reliance on China and potentially reduce costs by tapping into lower labor costs and favorable trade agreements in emerging markets. Furthermore, diversifying production locations can enhance supply chain resilience, ensuring continuity despite changing dynamics.
Hong Kong's financial sector is an integral part of its economy, contributing significantly to Hong Kong's GDP, and establishing the city as one of the world's leading financial centers.
As businesses expand their operations under the China Plus One strategy, Hong Kong's financial sector can play a crucial role in enabling cross-border investments, providing financial services, and managing risks associated with international expansion. This presents an opportunity for Hong Kong's financial institutions to strengthen their position as regional leaders in providing innovative financial solutions and supporting businesses venturing into new markets.
Consequently, this growth and diversification in the financial sector can also have a positive ripple effect on other sectors, such as manufacturing and logistics, as businesses seek solutions for their expansion into new markets.
The China Plus One strategy runs on logistics. Hong Kong's well-established position as a regional trade hub — with direct connections to manufacturing markets across Southeast Asia — makes it a natural base for managing multi-country supply chains.
As businesses diversify their supply chains, the demand for Hong Kong logistics services including international shipping, customs brokerage, and end-to-end supply chain visibility will increase, creating new opportunities for Hong Kong's top international logistics providers, such as DHL Express.
Within the China Plus One framework, Southeast Asian markets offer a combination of cost advantages, trade benefits, and growing consumer demand. Here is how the top destinations compare:
Vietnam is one of the most established Plus One destinations for Hong Kong manufacturers. Labour costs are significantly lower than in China's major manufacturing cities, making it particularly attractive for electronics assembly, garment production, and tech components. Its proximity to China also simplifies cross-border supply chain management.
India attracts large-scale manufacturing investment due to its massive domestic workforce and strong government incentive programmes. A rapidly expanding middle class also makes India an increasingly important sales market for Hong Kong exporters.
Malaysia and Thailand are established choices for high-tech component manufacturing, automotive parts, and specialised production. Both markets offer strong infrastructure, skilled workforces, and favourable investment conditions for Hong Kong businesses expanding their Plus One footprint.
Feature | China (Main Base) | Vietnam / India / Malaysia (Plus X) |
Role | High-tech parts manufacturing | Final assembly and basic components |
Trade Benefit | Extensive local supplier networks | Lower duties through RCEP and regional trade deals |
Cost Profile | High efficiency, higher labour costs | Lower labour costs, developing infrastructure |
Market Goal | Global and China domestic sales | Asia regional expansion and risk diversification |
Hong Kong businesses can leverage two major trade frameworks when expanding into Southeast Asia:
The ASEAN-Hong Kong Free Trade Agreement (AHKFTA) provides preferential access to key markets in the region. These agreements eliminate or reduce tariffs on a wide range of goods, streamline customs procedures, and promote investment flows, creating favorable conditions for Hong Kong businesses to expand their import or export operations in ASEAN.
While Hong Kong is currently in the process of joining RCEP, businesses with manufacturing operations in RCEP member countries — including Vietnam, Malaysia, Thailand, and mainland China — can already leverage the agreement's unified rules of origin and reduced tariff rates when moving goods between member markets. Upon Hong Kong's formal accession, these benefits will extend further, cementing the city's role as a regional supply chain hub.
Setting up a Plus One hub involves more than finding a factory. Here are the three most common challenges Hong Kong businesses face — and how to address them:
H3: Understanding Rules of Origin
Getting your origin documentation right is not optional — errors can be costly and compliance consequences are immediate.
Correct product classification is one of the most overlooked — and most costly — compliance risks in cross-border logistics.
The more hubs you operate, the more complex your logistics become — without the right partner, that complexity quickly becomes costly.
You cannot manage what you cannot see. When your supply chain spans multiple countries, real-time visibility is the difference between catching a delay early and losing a customer.
When goods are moving between multiple countries simultaneously, a single connected dashboard is not a luxury — it is a necessity.
Expanding into new markets means meeting new customer expectations — and delivery flexibility is increasingly a deciding factor.
End-to-end supply chain management across a multi-hub network requires a reliable logistics partner who can:
Use this checklist to assess whether your China Plus One network is built for what comes next:
Audit Area | Key Question | Why It Matters |
Trade Laws | Have you identified the trade agreement with the lowest applicable duty rate for your product? | Optimising your tariff structure keeps total landed costs competitive |
Infrastructure | Does your new hub have sufficient port access, power supply, and logistics connectivity? | Infrastructure gaps create unexpected delays and cost overruns |
Digital Tools | Are your systems connected to a global logistics partner for real-time shipment visibility? | Live data helps you identify and resolve delays before they escalate |
Duty Thresholds | Are you leveraging local duty-free import thresholds to reduce costs on smaller shipments? | Using de minimis thresholds lowers costs for e-commerce and sample shipments |
Sustainability | Are your new hubs aligned with your ESG commitments and green warehousing standards? | Environmental compliance is increasingly required by major buyers and regulators |
DHL Express handles thousands of documents, parcels, and cargoes every single day. Its global network of international specialists are well-versed in customs regulations so that every shipment moves on to its destination. Whether you're importing or exporting, opening a DHL Express Corporate Account means all the hassle of customs will be taken care of for you, so that you can focus on the business of selling!
Open a DHL Express Corporate Account to Enjoy Special Discount Today!The China Plus One strategy adds one secondary production or sourcing hub outside China to reduce single-country dependency. The Plus X model goes further — building multiple secondary hubs simultaneously across different countries, such as Vietnam for electronics assembly, India for large-scale manufacturing, and Malaysia for tech components. Plus X offers greater resilience across your supply chain but requires more sophisticated cross-border logistics coordination to manage effectively.
The right destination depends on your product type, target market, and operational needs. Vietnam suits electronics and garment manufacturers due to competitive labour costs and proximity to China. India is preferred for large-scale production requiring a sizable workforce and government incentive support. Malaysia and Thailand are strong for automotive parts, high-tech components, and specialised manufacturing. DHL Express operates across all these markets and can advise on the logistics feasibility for your specific business requirements.
RCEP (Regional Comprehensive Economic Partnership) covers 15 Asia-Pacific economies including mainland China, Vietnam, Malaysia, Thailand, Japan, and Australia. While Hong Kong is currently in the process of formally joining RCEP — with unanimous support from all member states — businesses with manufacturing operations in RCEP member countries can already benefit from the agreement's unified rules of origin and reduced tariff rates when moving goods between hubs. This means lower duty costs on inter-hub component transfers, less paperwork at each border crossing, and a more cost-efficient overall supply chain structure.
Goods exported from Hong Kong require a Certificate of Origin issued by the Hong Kong Customs and Excise Department (香港海關) or an authorised body such as the Hong Kong General Chamber of Commerce. The certificate must accurately state where the final and substantial manufacturing step occurred. For goods manufactured in Mainland China, origin is declared as China — this is essential for compliance when exporting to the EU, US, and other markets with origin-based tariff requirements. Incorrect declaration risks shipment rejection and financial penalties.
Timelines vary by country, industry, and scale of operation. Registering a business entity in Vietnam, for example, typically takes two to four months, while securing factory space, recruiting local staff, and completing compliance requirements can add a further six to twelve months. Working with an experienced logistics partner like DHL Express from the outset can help compress these timelines — covering import documentation for production equipment, local customs navigation, and ensuring your first cross-border shipments move without delays from day one.
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