Foreign firms look to reduce reliance on China, poll shows

Strategy known as ‘China Plus One’ sees companies boosting operations in Vietnam, India and elsewhere
Growing trend of remote work brought on by Covid-19 pandemic has also encouraged firms to downscale offices, survey says

China economy

Kyodo

Published: 11:30am, 7 Feb, 2021

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Over half of Japanese businesses in Vietnam and India have plans to expand their in-country operations, a recent survey showed, in a sign of the shift towards reducing reliance on China as a production base in what is known as a “ China Plus One” strategy.

In the online survey conducted in December by Japanese staffing firm Pasona Group, 57 per cent of Japanese companies in Vietnam and 55 per cent in India said they would expand operations in the host countries, compared with the average of 39 per cent among all 11 countries and regions polled.

In contrast, Hong Kong stood lowest at only 13 per cent in the wake of deterioration in the trade environment following Beijing’s dismissal of pro-democracy lawmakers and crackdowns on democracy activists in the former British colony, according to the survey.

Of the 818 companies polled, 67 per cent said they planned to keep the current level of their bases and operations in the 11 economies.

Twenty per cent said they planned to add and strengthen functions of their bases as regional headquarters, partly due to difficulties in making business trips to and from head offices in Japan amid the coronavirus pandemic, the survey said.

With Southeast Asian countries and regions hit hard by the pandemic, 30 per cent of Japanese companies in Thailand, 28 per cent in Malaysia and 22 per cent in Hong Kong said they had downsized posted staff or planned to do so within the next three months. The average across all respondents was 16 per cent.

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The growing trend of remote work brought on by the pandemic coupled with high property prices has also encouraged firms to downscale offices, with at least 15 per cent in Hong Kong, Singapore and Indonesia saying they had or planned to do so.

In a show of the China Plus One strategy, 43 per cent of respondents in Vietnam said they had expanded offices or planned to.

Seventy-four per cent of the respondents cited lack of communication between employees as an issue of concern regarding remote working, followed by 59 per cent who cited performance evaluation of staff.

The economies covered by the survey were the United States, Canada, Hong Kong, Taiwan, South Korea, Thailand, Vietnam, Malaysia, Singapore, Indonesia and India.