The Hype Around China+1 Never Made Sense to Me
China +1 strategy must be based on operational reality
The Return to China Is Not a Surprise
For the past few years I watched the China+1 hype build across LinkedIn and the media, and I struggled to understand it.
Now the articles are appearing about brands "returning to China," written as though this is some remarkable new discovery.
It isn't. For anyone working at the operational end of sourcing, this outcome was always the most likely one.
Why it was always going to happen
In many product categories, China's productivity is high enough to outweigh the lower labour costs available elsewhere. Cheaper wages mean little if output per worker, speed and quality consistency don't match.
That productivity gap is widening, not closing. Chinese factories are investing heavily in automation, and China now accounts for around half of all industrial robots installed globally each year. Rising wages have pushed manufacturers to automate rather than relocate, which means output per worker keeps climbing. A lower wage rate in another country offers little advantage when competing against a highly automated Chinese production line.
More importantly, often the inputs still come from China. The raw materials, the components, the machinery, the technical know-how and often the capital behind new non-China factories are Chinese.
The highly efficient supply chain clusters that took decades to build in China have not been replicated anywhere else.
So in many cases, moving production out of China delivered two things: a higher landed cost, and no genuine diversification of risk. If your materials, tooling, machinery and investment still originate in China, your supply chain is still dependent on China. It is simply longer, more complex and more expensive.
Where the push came from
For countries like Australia, the China+1 drive largely came from the boardroom and was pushed down to operational teams, many of whom knew it made little commercial sense.
In my view, a lot of this was about ticking a risk diversification box. Boards wanted to reassure investors whose understanding of supply chains came from the financial pages rather than from factory floors. The result was decisions that looked good in an annual report but didn't hold up in practice.
The result
In many cases, sourcing teams invested significant resources to find non China sources so a risk diversification box could be ticked. The first order was placed which resulted in higher costs and supply chain fragmentation. After that, supply was switched back to China.
What actually makes sense
Good sourcing strategy hasn't changed. It means placing production with the most appropriate source, the one that delivers the right product at the right cost and quality, while sensibly optimizing your supply options. Sometimes that source is in China. Sometimes it is in Vietnam, India, Türkiye or wherever else makes sense. The decision should be driven by the product, the category and the business need.
What doesn't make sense is moving production elsewhere at a higher cost than your competitors, fragmenting your supply base, and calling it risk diversification when the underlying dependency hasn't changed at all.
The raw material test
The real test of any diversification strategy is simple. If the raw materials, components and machinery are still from China, you have not diversified your risk. You have only moved the final step of production.
And if non-China inputs come at a cost that makes you uncompetitive, that isn't a workable strategy either.
There may be cases where paying a premium for a fully independent supply chain is justified as insurance, but that should be a deliberate, costed decision for specific products and risks, not a blanket response to a headline.
The American lens problem
Much of the China+1 conversation was shaped by US conditions, particularly tariffs. For American importers facing significant duties on Chinese goods, the cost equation genuinely changed and relocation could make commercial sense.
But that logic doesn't automatically transfer to business in other countries that isn't subject to the same tariffs. Applying a US-specific solution to a non-US problem simply means paying more than you need to.
AI tools are now adding to this hype and misinformation. They draw on the majority view online, and much of that content is written from an American perspective. Ask an AI tool about sourcing strategy and it may well tell you China+1 is the way to go. That doesn't mean it is right for you, particularly if you are not American and not impacted by those tariffs.
The lesson
Supply chain decisions should be grounded in operational reality, not in headlines or the loudest voices online.
The return to China isn't a surprise. It is a correction back to what the numbers were saying all along.
About Supply In Sight
Supply In Sight is an international supply consultancy led by Ross Matthews, helping brands and retailers in Australia, New Zealand, the UK and Europe build reliable supply from China and Asia. Ross brings over 30 years in sourcing and supply chain, including 20 years working in Asian supply, much of it based in China, in roles from Sourcing Business Manager and Supply Chain Director to Head of Supply Chain and CEO of an outsourced buying office.
If you want to make risk diversification decisions based on operational knowledge of what is actually happening on-the-ground, get in touch for a practical conversation.