How the China Plus One Strategy Affects Logistics in Southeast Asia

The global supply chain landscape is undergoing a significant transformation. Businesses worldwide are rethinking their manufacturing and sourcing footprints, leading to the increasing prominence of the China Plus One strategy, sometimes referred to as China 1 or China + 1. Driven by evolving geopolitical dynamics, the lessons learned from pandemic-related disruptions, and a desire for greater operational resilience, companies are actively seeking to diversify their dependencies beyond mainland China.¹ This strategic shift has cast a spotlight on Southeast Asia (SEA), positioning the region as a prime destination for investment and operational expansion.

This article delves into the implications of China Plus One, analyzing its impact on Singapore's crucial role as a regional logistics hub and the broader effects on the logistics ecosystem across Southeast Asia.

What is China Plus One and why is SEA a key part of it? 

What is China Plus One? At its core, the China Plus One Strategy is a business approach focused on diversification. It involves companies expanding their manufacturing or sourcing operations to include at least one additional country alongside their existing base in China, rather than relying solely on it.

Several key factors are driving the adoption of this strategy, particularly with a focus on SEA:

• Geopolitical considerations & trade tensions: Ongoing trade friction and geopolitical uncertainties encourage businesses to mitigate risks associated with over-concentration in a single market.²
• Supply chain resilience: The disruptions experienced in recent years highlighted the vulnerabilities of highly centralized supply chains. Diversification is now seen as essential for ensuring business continuity and stability.³
• Economic diversification & cost management: Rising operational costs in certain Chinese regions⁴, coupled with the desire to tap into new growth markets, makes diversification economically attractive.
• SEA's attractiveness: Nations across Southeast Asia offer compelling alternatives. They present a combination of competitive labor costs (in many areas), improving infrastructure, growing domestic consumer markets, strategic geographic locations, established manufacturing capabilities in various sectors (like electronics, automotive, and textiles), and supportive government policies aimed at attracting foreign direct investment (FDI).

How businesses in SEA can capitalize on China Plus 1

For businesses based in Singapore, the China Plus One shift presents significant opportunities. Leveraging the nation's inherent advantages is key:

• Strategic advantages: Singaporean companies can utilize the country's extensive network of Free Trade Agreements (FTAs), sophisticated financial services sector, deep pool of logistics expertise, and strong trade relationships across Asia. The city-state's reputation serves as a springboard for regional expansion.
• Supply chain mapping & diversification: Thoroughly analyzing existing supply chains to identify concentration risks and evaluating potential alternative sourcing or manufacturing locations within SEA (e.g., Vietnam, Malaysia, Indonesia, Thailand).
• Building regional partnerships: Establishing strong relationships with suppliers, manufacturers, and logistics providers in target SEA markets.
• Investing in technology: Implementing digital tools for enhanced supply chain visibility, forecasting, and management across multiple locations.
• Leveraging Singapore's hub status: Utilizing Singapore as a base for regional distribution, inventory management, high-value manufacturing, R&D, or headquarters functions coordinating SEA operations.
• Understanding local nuances: Adapting business practices to suit the specific regulatory, cultural, and market conditions of chosen "+1" countries.

Embracing adaptability and forging strong regional partnerships are crucial to harnessing the benefits of China Plus One, which include reduced risk, potentially lower costs, and access to new, rapidly growing consumer markets within South East Asia.

What is SingaporeG’s role as a logistics hub in the China 1 Strategy?

Singapore stands as a pivotal player in the evolving regional landscape shaped by the China Plus One strategy. Its existing strengths provide a solid foundation:

• World-class infrastructure: Singapore boasts a globally top-ranked airport (Changi) and seaport facilities, offering unparalleled physical connectivity.
• Exceptional connectivity: Beyond physical infrastructure, Singapore offers robust digital connectivity, a vital component for modern supply chain management.
• Stable & pro-business environment: A predictable regulatory framework, strong rule of law, robust intellectual property protection, and political stability make it a trusted location for businesses.
• Skilled workforce & ecosystem: Access to a highly skilled talent pool, particularly in logistics, finance, technology, and high-value manufacturing, supports complex operations.

The China Plus One trend enhances Singapore's role, positioning it not just as a point of transit but as a strategic control tower and high-value logistics hub for the increasingly complex regional supply networks. Singapore is ideally positioned to facilitate the seamless flow of goods, capital, data, and services between China and the newly established "+1" locations across Southeast Asia, acting as a critical intermediary and value-adding node in these diversified supply chains.

How DHL Express can support Singapore businesses

Navigating the complexities of the China Plus One Strategy and managing a diversified global supply chain requires a global logistics partner with deep regional expertise and a robust global network. DHL Express is ideally positioned to support Singapore-based businesses in this transition.

Understanding the intricacies involved in managing multi-country sourcing and distribution, DHL’s tailored logistics solutions are designed to address the specific challenges and opportunities presented by the China Plus One shift:

• Seamless international shipping: Leveraging our extensive global logistics network, we ensure efficient and reliable transportation of goods between China, Singapore, and various locations across Southeast Asia and beyond. 
• Customs expertise: Our in-depth knowledge of customs regulations and procedures across different SEA countries helps streamline cross-border movements, minimizing shipping delays and ensuring compliance.
• Advanced supply chain management: We offer solutions that provide visibility and control over complex supply chains, enabling businesses to manage inventory, optimize routes, and respond effectively to market changes.
• Regional network & presence: With a strong presence throughout Southeast Asia and internationally, we offer localized support and understanding of on-the-ground conditions.

The China Plus One era presents both challenges and immense opportunities. Partnering with an experienced and trusted logistics partner like DHL Express will simplify the complexities of international trade, enabling businesses to capitalize effectively on this strategic market shift. Read our guide to shipping from China to Singapore for further insights on optimizing your logistics operations.