One year has passed since companies began conspicuously moving production and procurement out of China to avoid high US tariffs against China. Some companies have deeply realized that "China Plus One," which aims to replicate China's manufacturing ecosystem in other countries, is not easy, and are gradually returning production to China. This was reported by Reuters.

According to Reuters, while global efforts to diversify supply chains are expanding due to the impact of Trump tariffs, Dawang Fine-casting, a metal casting company in Dandong City, China, lost business when a major US customer moved some orders to India. However, according to the company's vice president, this customer returned with new orders after facing problems in India.

Dawang Fine-casting also once considered moving part of its production overseas but later abandoned the idea. The vice president stated, "The advantages of China's supply chain are still very significant, and it is difficult to replicate the domestic production system in other countries."

While many companies continue to invest in manufacturing bases in Southeast Asia, the "China Plus One" strategy, which aims to diversify risks associated with dependence on China to other countries with lower tariff rates, has proven more difficult to implement than expected.

Manufacturing bases competing with China include India, Indonesia, and Vietnam. According to sources familiar with the matter, Chinese e-commerce giant SHEIN is also scaling back some of its operations in Vietnam. An exporter of outdoor furniture in Hangzhou, eastern China, stated, "We closed the workshop we opened in Ho Chi Minh City, Vietnam, in 2024 and moved production back to China this year."

The withdrawal from Vietnam was due to the difficulty of procuring necessary equipment and the need to bring in basic materials such as molds for screws and cup holders from China. It was also pointed out that the profitability that had justified the overseas relocation had changed. "When everything was factored in, there was no significant difference in total cost, so there was no point in relocating," the exporter explained.

The CEO of DST Pack, a Poland-based packaging company, navigated a tough period where plastic raw material costs rose by 15% in April due to soaring crude oil prices, by cooperating with its Chinese manufacturing partner of six years. DST Pack sources 80% of its production from its factory in Shenzhen, with the remaining 20% sourced equally (10% each) from long-term partner factories in the US and Europe.

The cost per unit in US and European factories is two to three times higher. The CEO observed his business partners struggling in Vietnam and other locations, leading him to abandon the idea of relocating to Southeast Asia. He stated, "We faced many problems from the start of production to export. The local systems do not function as smoothly as in China." (Edited by Hyuga)