In the evolving dynamics of global supply chains, multinational corporations have increasingly adopted the “China Plus One” strategy, aiming to diversify manufacturing footprints beyond China’s borders to mitigate risks from geopolitical tensions, tariffs, and supply disruptions. This approach, which gained momentum post-COVID-19, encourages investments in alternative hubs like India, Vietnam, and Mexico, ostensibly reducing overreliance on a single market.

Yet, as recent analyses reveal, this diversification often masks a deeper dependency on Chinese components and expertise, turning what appears to be a strategic shift into a more nuanced extension of China’s influence. For instance, in India’s push for electronics self-reliance, the strategy has inadvertently deepened ties with Chinese suppliers, according to a detailed examination in the India Dispatch.

The Illusion of Diversification

India’s ambitions under schemes like Production-Linked Incentives (PLI) have attracted billions in investments from companies like Apple and Foxconn, positioning the country as a key beneficiary of the China Plus One wave. Exports of iPhones from India to the U.S. have surged, with research from Business Insider highlighting how Apple’s supply chain makeover has given India a massive win over China in export shares.

However, this progress comes with strings attached. A significant portion of India’s electronics manufacturing relies on imported Chinese parts, from semiconductors to assembly know-how, making true independence elusive. The India Dispatch article by Manish Singh underscores this paradox, noting that India’s self-reliance strategy in electronics paradoxically requires heavy reliance on its biggest rival, China, for critical inputs.

China’s Strategic Redirects

Far from retreating, China is actively redirecting its outbound investments to bolster its global reach, as evidenced in a recent EY report on China’s outbound investment for the first half of 2025. The report details a US$80 billion outflow, down slightly year-over-year but strategically targeted at nations like Hungary, Mexico, and Vietnam—precisely the “Plus One” destinations where Western firms are shifting operations.

This move allows China to maintain control over supply chains indirectly. Posts on X from industry observers, such as those noting Beijing’s investments in strategic nations, reflect a sentiment that China isn’t resisting diversification but is instead embedding itself deeper into alternative hubs. For example, investments in Mexico enable Chinese firms to circumvent U.S. tariffs by assembling products closer to North American markets.

Risks in Emerging Hubs

Southeast Asia, often touted as a prime China Plus One region, is cashing in on this shift, with countries like Vietnam and Thailand seeing influxes of manufacturing facilities. Yet, a risk outlook from S&P Global warns of vulnerabilities in these economies, including political instability and infrastructure gaps, which could amplify supply chain risks rather than alleviate them.

Moreover, a Global Trade Review analysis from July 2025 labels Mexico as one of the riskiest sourcing destinations among major trading nations, due to factors like cartel violence and trade policy uncertainties. This contrasts with the optimism in sources like Drishti IAS, which positions India as a prime manufacturing alternative, but overlooks the embedded Chinese dependencies.

India’s Role and Challenges

In India, the narrative is particularly compelling. Tech giants like Foxconn are injecting $1.5 billion into local operations, as reported by Times Now in May 2025, amid Apple’s efforts to pivot production away from China amid rising geopolitical risks. Favorable policies and a vast labor pool make India attractive, yet the reliance on Chinese intermediates persists, as Singh’s India Dispatch piece argues, potentially undermining long-term autonomy.

Industry insiders point to sectors like chemicals, garments, and tiles where China Plus One is gaining steam, per older insights from Wikipedia and Business Standard, but updated 2025 data shows China’s global manufacturing share continuing to rise despite diversification efforts. An X post from The Economist on August 15, 2025, emphasizes that the strategy isn’t just about dodging tariffs—it’s also a hedge against China’s rising labor costs and export controls.

The Broader Implications for Global Trade

As companies navigate this, the strategy’s effectiveness is questioned. China’s trade surplus has ballooned to $1 trillion, defying predictions of decline, as noted in X discussions referencing post-COVID expectations. This resilience stems from China’s pivot to higher-value products and subsidies, maintaining dominance even as firms “diversify.”

For insiders, the key takeaway is vigilance: true diversification demands scrutinizing supply chains for hidden Chinese links. A blog from IntoGlo dated June 2025 advocates for broader risk reduction through multi-country sourcing, echoing sentiments that without addressing core dependencies, China Plus One remains an extension of the status quo.

Future Outlook and Strategic Adjustments

Looking ahead, with the current date marking mid-2025, experts anticipate further shifts. EY’s data suggests China’s outbound investments will continue targeting Plus One nations, potentially creating hybrid models where Chinese capital funds non-Chinese assembly. This could benefit economies like India’s, but at the cost of strategic leverage.

Ultimately, for multinational executives, adapting means investing in local R&D and supplier ecosystems to break the cycle. As one X post from investor Abhijit Chokshi highlights, India’s PLI schemes are drawing billions, yet the global supply chain shift demands more than relocation— it requires reengineering dependencies to ensure resilience in an interconnected world.