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Can India take advantage of growing China Plus One strategy?
Steve Watson
Equity Portfolio Manager
Johnny Chan
Equity Analyst
Anirudha Dutta
India macro analyst

Apple’s recent announcement that it will manufacture the latest iPhone 14 model in India has added further fuel to a growing China Plus One narrative.

In short, this is where global businesses are avoiding investing solely in China to re-orient and diversify their supply chains.

From an investment perspective, it will be important to gauge how far, and how quickly, this shift might affect “the world’s factory”, as well as the opportunity it potentially opens for India and other countries well-placed to assume part of the global supply burden.

Key for India, as it has been for China over the years, is the sheer scale of potential domestic demand, with a huge local market making the decision to set up manufacturing hubs in the country easier.

This is why India is a different proposition to other options such as Indonesia, Thailand and Vietnam, which are dwarfed in population terms by China. In contrast, India is currently the world’s second most populous nation (home to 1.417 billion people in 2022, compared with China’s 1.426 billion) but could take the top spot as early as this year, according to UN forecasts1.

Shifting demographics

Can India take advantage of growing China Plus One strategy?

As at October 2022. Figures from 2023 onwards are International Monetary Fund (IMF) estimates. Source: IMF

From China’s perspective, Capital Group specialists in the region agree that the Plus One effect will happen very slowly despite current headlines pointing loudly in that direction.

Despite a push for supply chain diversification, China continues to see huge foreign direct investment, with its manufacturing infrastructure, logistics facilities and skilled labour hard to move away from in the short term.

1. Source: United Nations, World Population Prospects 2022

Steven T. Watson is an equity portfolio manager at Capital Group. He has 35 years of investment experience and has been with CG for 33 years. He holds an MBA in finance from New York University Graduate School of Business Administration, a master’s degree in French studies from New York University Institute of French Studies and a bachelor’s degree in French from the University of Massachusetts graduating cum laude. He is based in Hong Kong

Johnny Chan is an equity investment analyst at Capital Group with research responsibility for Asian internet and real estate in Hong Kong. He has 24 years of investment experience and has been with Capital Group for 16 years. Earlier in his career at Capital, he also covered Indian IT services, European payment technology, and Japanese technology hardware companies. Johnny is a graduate of Harvard Business School's Advanced Management Program, holds a postgraduate diploma in accounting and finance from the London School of Economics and a bachelor’s degree in electronic engineering from Hong Kong University of Science and Technology. He also holds the Chartered Financial Analyst® designation. He is based in Hong Kong.

Anirudha Dutta  is an India macro analyst at Capital Group with broad sector and macro research responsibilities in India. He has 32 years of investment industry experience and has been with CG for nine years. He holds a postgraduate diploma in business management from the Xavier School of Management and a bachelor’s degree with honours in metallurgical engineering from the Indian Institute of Technology. He is based in Mumbai.


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