Important information

This website is for Institutional Investors in France only.

If you are an Individual Investor click here, if you are an Financial Intermediary click here. Should you be looking for information for another location, please click here.

By clicking, you acknowledge that you have fully understood and accepted the Legal and Regulatory Information.

Capital IdeasTM

Investment insights from Capital Group

Categories
India
Can India take advantage of growing China Plus One strategy?
Steve Watson
Equity Portfolio Manager
Johnny Chan
Equity Analyst
Anirudha Dutta
India macro analyst
March 27, 2023

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


Steve Watson is an equity portfolio manager with 36 years of investment industry experience (as of 12/31/23). He has an MBA and an MA in French studies from New York University as well as a bachelor's degree from the University of Massachusetts.

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.

 

Learn more about
India
China
Emerging Markets
Download PDF

Our latest insights

RELATED INSIGHTS

Past results are not predictive of results in future periods. It is not possible to invest directly in an index, which is unmanaged. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.

Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.