This strategic move reflects a growing recognition for China’s indispensability to the modern industrial and digital economy.

Risk to Strategy

The initial disregard for “China shedding” gained a lot of attention during the U.S-China trade war and grew even more during the COVID-19 pandemic. During that time supply chains were disrupted, being exposed to vulnerabilities due to over-reliance on a single country. Companies began adopting China+1 strategies while expanding their operations into Southeast Asia, India, and Mexico. While diversification has improved resilience in various industries, many were not able to replicate China’s scale and efficiency. China accounts for 30% of the global manufacturing output making it the world's largest industrial area. And with this, companies are improving their strategies by maintaining diversified supply chains and also leveraging China’s strength for growth and innovation.

Digital First Expansion by Chinese Companies

China offers a tightly integrated supply chain, advanced infrastructure and a skilled manufacturing workforce. China’s ability to deliver speed, scale and efficiency remains difficult to match. While attracting over $160 billion annually, China ranks among the top destinations for foreign direct investment. Many digitally native companies like ByteDance, Shein, and Temu are evidently shifting the narrative of China maxxing. These firms are leveraging its manufacturing and digital capabilities to expand globally, while their models combine China-based production with an international distribution base. For example, Shein’s ultra fast fashion supply chain relies on Chinese manufacturers producing small batches efficiently. Similarly, Temu uses a direct-from-factory to offer competitively priced goods to the global consumers.

Geopolitics and Economic Reality

Despite the new focus on China, with trade restrictions, export controls, and regulatory uncertainties continue to shape corporate decision-making. Various companies are fishing out options to diversify their supply chain commands, even governments in the United States and Europe are encouraging this diversification in critical industries such as semiconductor, energy and defense. However, the reality is far from it, as China is neither practical nor economic for most of the industries to operate.