China Plus One Strategy

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What is China Plus one strategy?

The COVID-19 pandemic ravaged the whole world and disrupted the entire global supply chain. It prompted companies to invest in other countries around the world to not depend on China wholly. This strategy is called China plus one strategy

How did China manage to attract initial foreign investment?

In the early 1980s, there was a spike in labor and manufacturing costs in western

countries. This made Western companies shift their manufacturing base from their

native countries to China, where cheap labor, low production cost, and enormous

domestic consumer markets for the companies to invest.

Significant reasons why companies are looking for alternatives to

Chinese?

A) The political ideology that China follows.

B) The spike in labor cost.

C) Geopolitical conflicts with neighboring countries.

On the other hand, the consumer market in India is already established and ready with cheap and skilled labor. Promoting employment of the youth will be highly beneficial for the country’s economy and attract foreign companies to the country.

How can India appeal to foreign investors?

Tariffs: Decrease import taxes on raw materials and machinery. The tax levied on raw material imports is about 40.8% and 29.8% after GST on machinery, making foreign companies think about their options upon investing in India.

Infrastructure: make transportation and infrastructure better and invest in special economic zones to attract labor for the factories.

A) The road connectivity in the country poses a significant problem as the quality of roads is below average in some parts of the country, which causes a delay in transportation and increases the cost of maintenance of the vehicle.

B) The airports and seaports are still not capable of handling a large consignment.

C) A faulty logistical approach also poses a problem that leads to companies reconsidering their options.

D) Invest in making good schools and hospitals around these economic zones to ensure the quality education of children of labor.

Address the power problem: Govt has to focus on giving power at a subsidized rate and invest in renewable energy sources to remove dependence on fossil fuels.

A) Invest in modernizing power transmission to long distances. Most of the power lines are still not underground, which poses a problem during natural calamities.

B) The government has to ensure that the power is supplied to each part of the country so that the factories in remote areas can function smoothly.

Try to promote the growth of small-scale industries and establish a communication channel between these small-scale industries and the MNCs and promote collaboration between them.

Promising stores of natural resources.: Ensure a proper supply of water and metals and minerals to these regions.

Try to make the policies & transactions transparent and make the system less corrupt. Also, there should be a reduction in government red tape, and the role of bureaucracy in making industries should be reduced.

Strongly investing and introducing new technologies and communication channels in manufacturing and transportation. The government has to aggressively support and promote skill development to ensure jobs for the country’s youth.

Resolve political ideologies and avoid clashes to ensure peace in the areas and attract the interest of foreign companies.

A) The Center has to cooperate with the state governments to reduce the clash between the center and the state.

B) Ensure stability with proper policing in the area to prevent antisocial elements from wreaking havoc and preventing rioting.

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