In other words, the foreign investors cease investment in China for expansion. Close on the heels, Thailand+1 strategy is also being geared up by the foreign investors in Thailand after Thailand was embroiled into political turmoil since past two years. One Plus One strategy has emerged a new era in FDI strategy whose aim is to hedge the investment in one country by investing in another country, instead of closing down the plant in original country.

China is loosing its sheen as the sole beachhead for foreign investment. The catchword “don’t put all eggs in one basket” is flaunting the foreign investors’ confidence, putting them into dilemma to invest in expansion in China. Wages are going high with the American pressure to delink the renminbi with US dollar. Corporate tax was unified in China, resulting the end of concessional tax regime for the foreign investors. Inflation is rising, pushing up food prices.

After Lehman shock, China lost its glee as the low cost destination for investment to produce exportable products. During the 2011-2013 China witnessed flat growth in FDI inflow.

However, with the rise in wages, China should have been attractive investment destination for domestic market because of its big demography in the world. But, China failed in it. This was because foreign investors were little enthused to invest in China to meet the domestic demand. The lure of buoyant domestic demand was hamstrung by hardship to do business in China. Delayed payment, sky-high corruption and widespread counterfeits stifled the opportunity to do business in China.

Japan is the frontrunner to adopt China + 1 strategy. Rift between China and Japan over the disputed island in East China Sea and revival of China’s hate against Japanese atrocities marked the end of Japanese investors’ beeline in China. Japanese investors in China are now eyeing for alternative destinations as insulation to their investment in South East Asia . They are accessing to Vietnam, Myanmar, Indonesia and India as their hedging destinations against the investment in China and Thailand.
Till 2012, China was the second biggest destination for Japanese investors. In 2013, Japanese investment plunged in China. It nosedived by 33 percent in China in 2013. In contrast, Japanese investment spurted in Vietnam and Myanmar. In Vietnam, Japanese investment surged by over 75 percent in between 2011-2013.

Besides beholden by low cost, Vietnam and Myanmar will help the Japanese firms to diversify the risks and exploit the opportunities in new markets. According to a survey, wages for general workers category in China are 200 percent more than in Vietnam and four times more than in Myanmar.

Given the rise in investment risks in China and Thailand, India stand for a qualified diversification to hedge the investment by the foreign investors. Despite slipping from high to medium growth in the economy, FDI in India improved in 2013-14. The growth unleashed the foreign investors confidence in the country. The factors, which bolstered FDI confidence, were the bouncing back of the economy in growth, strong parameters of the economy which were mirrored by spurt in stock market, liberal and forward looking of the Modi government towards foreign investment and the assertiveness to make India the manufacturing hub of the world. In other words, India can move forward on the heel of Chinese growth pattern with the help of foreign investment.

Indian wages are much lower than in China and moderately lower than in Thailand. For general category of workers, Indian wages are 40 per cent lower than in China and 25 percent cheaper than Thailand. For example, according to a survey, in the beginning of 2013, the average wage of a general category of worker was US $465-470 per month in Beijing and US $ 345-350 per month in Bangkok against $275-280 per month in New Delhi. In the category of mid-level engineers, the average wage was US $ 740 per month in Beijing and US $ 700 per month in Bangkok as compared to US $ 640-650 per month in New Delhi

India can serve the platform for One Plus One strategy destination for the automobile assemblers in China and Thailand. Both these countries account for 70 percent of annual production of cars and commercial vehicles in South East and East Asia (excluding Japan). Given the surge in price war, car industry is indulging into severe competition in South East Asian countries. With the industry being component based manufacture, India can exploit the opportunity by supplying components at competitive prices to these countries. The low wages and a large pool of skilled manpower, accompanied by high IT professionals will spearhead India to have an edge over other component supplying countries.

The ongoing FTA (Free Trade Agreement) initiative is another leeway for India to grab the opportunity and serve as platform for One Plus One strategy. India has FTA with ASEAN countries, including Thailand. India is one of the leading producers of auto components. It produces about US$ 40 billion worth auto components a year. About one-fourth of its production is exported. It supplies as OEM (original equipment manufacturer) to all the leading auto giants in the world. Given the manufacturing muscles flexed with the fast growth of automobile industry, India can be reckoned a potential destination for One Plus One strategy for the auto giants in Asia. (IPA Service)