What is China Plus Strategy and Why it Can Become a Game Changer for the Indian Economy?

How, China Known as the Factory of the World Is Losing Its Seen Due To the China plus Strategy

China is known as the “factory of the world”. This is because it is the world leader in hosting manufacturing plants of Western multinationals, who have moved their offshore production facilities since the 1970s there, attracted in part by the availability of abundant labor, lower wages boosting their profits, and the overall high quality work that the Chinese people are known for.

Indeed, China’s economy has grown leaps and bounds over the last four to five decades, since it opened up to trade and embraced globalization in the late 1970s. This has made the Chinese economy the second largest in the world and has resulted in massive industrialization and urbanization of its cities and semi urban areas, in addition to raising living standards of its people.

However, since the pandemic struck the mainland (aided by the fact that the Corona virus emerged there in Wuhan), its reputation as a reliable and efficient warehouse of the world has taken a major beating, with the consequence that many Western firms are now actively “looking beyond” China, which is what the China Plus strategy is all about.

What is Driving the China plus Strategy, and Why Apple’s Pioneering Move Can Be the Spark?

Essentially the China Plus strategy is a conscious move by Western firms such as Apple to move parts of their global supply chains away from China and into other emerging markets such as India and Vietnam. Indeed, this “reconfiguring” of their global supply and value chains means that these firms are setting up manufacturing facilities in other countries to ensure “de-risking” in case there is another disruption to their production and shipments from China.

For instance, Apple has moved nearly half of its iPhone manufacturing plants to India and Vietnam in the last one year or so, thereby ensuring that any dislocations in its Chinese facilities do not affect the sales of its iconic products back home in the United States. Though Covid and its subsequent “clogging” of supply chains was the catalyst, there have been other concerns as well, mainly to do with increasing instances of labor unrest as the Chinese people are angry and disenchanted with their government and its policies, thereby stoking unrest and strife.

In addition, the “botched” Zero Covid Lockdowns have been the “last straw” for Apple and other firms, who no longer view China as they did over time, leading to China Plus strategy.

How Xi’s Losses Can Become Modi’s Gains and Become a Game Changer for the Indian Economy

The China Plus strategy can indeed become a game changer for the Indian Economy as we have been “struggling” to entice global firms to setup their manufacturing bases here, ever since we liberalized our economy in the 1990s.

Indeed, Covid and China’s other “problems” have come as a boon to India, reeling under its “shrinking” manufacturing sector, which is a job creator, more than its much vaunted services sector. Therefore, if India does play its cards well, the China Plus strategy can boost its exports, create jobs for its Millions of youth, and above all, establish it as a reliable partner in global supply chains.

Moreover, the Indian Economy can benefit as more and more Western firms adopt the China Plus strategy, and in conjunction with the Modi government’s Atmanirbhar policy, can actualize a Double Gain result, as both our exports and Make In India benefit at the same time.

In addition, given India’s rising stature on the world stage, the China Plus strategy can boost our standing and announce to the world that India can and does have the potential, intent, and capabilities to emerge as a serious competitor to China. Indeed, Xi’s losses can well be Modi’s gains.

Never Let A Good Crisis Go Waste! Challenges for Indian Firms and Strategies to Overcome Them

Having said that, one must not start celebrating prematurely as there are several challenges that India has to overcome before the China Plus strategy brings gains to the Indian Economy.

China, over the years has become the world’s factory, due to its disciplined and precision targeted approach, where efficiency and productivity of its workforce and a congenial atmosphere for Western firms became the hallmarks of its success. While India does have these capacities, concerns over periodic social unrest and civil disorder can set it back and lose out to other countries such as Vietnam.

Already the Indian Economy faces serious competition in many sectors from Bangladesh and Vietnam, as well as other emerging markets and so, we just cannot afford to let this opportunity to slip by.

Moreover, we need to ensure political stability, good governance, especially at the civic level, and above all, maintain world standards in production quality and human resources. For this to happen, several converging challenges have to be dealt with in the realms of education, health, and governance. In addition, we can reap the benefits of the China Plus strategy by enhancing our soft power appeal by aggressively marketing and trumpeting our advantages over China.

The Indian Economy Can Benefit From Near Shoring and Friend Shoring As Well

Last, in a world of ever shifting currents and countercurrents, the China Plus strategy should be seen as one among other such moves by Western firms, as Near Shoring and Friend Shoring become the norm. The former pertains to outsourcing to nearby locations and the latter to friendly nations that can guarantee geopolitical stability.

With the Chinese falling out of favor with the West and India steadily becoming a valuable and valued partner, this is the time for us to seize the opportunities. For this to happen, Indian firms must up their game and complement and synergize with the government.