Executive Management Leadership Ver15. _ “The Necessity and Difficulty of Reducing Dependence on China”
- Shigenori Tanaka
- 6月22日
- 読了時間: 3分
Jun 22, 2026
Thank you for taking the time to read this.
In this article, I would like to outline the reasons why the need to reduce dependence on China is increasing, while the actual execution remains difficult.
In the manufacturing and supply‑chain fields, it feels that in recent years we increasingly hear the term “de‑China.”
Due to geopolitical uncertainty, the possibility of policy changes, and China+1 requests from customers, movements to reassess dependence on China appear to be spreading.
However, my impression is that there are still not many companies that have actually been able to proceed with relocation. I believe this is due to management‑related reasons.
■ Background of why reducing dependence on China is required
When dependence on China is high, the following risks are often pointed out:
Possibility of sudden regulatory changes or export/import restrictions
Supply risks due to electronic‑component manufacturing processes being concentrated in China
Changes in customer procurement policies
Rising labor costs
Concerns about technology leakage
■ Why many companies cannot move: supply‑chain strength and sunk costs
China’s supply chain is said to have very high overall capability, including:
Proximity of component procurement
High factory density
Logistics infrastructure
Speed of mass‑production ramp‑up
In addition, over the past 20 years, companies have accumulated the following investments in China:
Fixed assets such as factories and warehouses
Equipment, molds, and jigs
Building local corporate organizations
Supplier development
Human‑resource development
Because these cannot be recovered after a company withdraws, sunk costs have become a major obstacle to decision‑making.
■ China’s cost advantage remains significant
China’s overall cost competitiveness is still considered strong, supported by:
Labor productivity
Manufacturing concentration
Supplier networks
Logistics efficiency
As a result, it is not easy to reproduce the same cost structure in ASEAN or Japan.
In this context, India is attracting attention as a country that may offer cost advantages comparable to China. However, due to infrastructure and quality‑related challenges, there are cautious views that full relocation is not yet realistic.
■ Companies such as SUZUKI that have withdrawn or reduced operations in China
There are exceptional cases of companies that have achieved complete withdrawal from China. SUZUKI may be one such representative example.
Complete withdrawal from China‑based production
Full transfer to Maruti Suzuki in India
Complementary structure with Japan and ASEAN
In addition, in sectors such as home appliances, electronics, and automotive parts, there have been reports of companies reducing production in China and shifting to ASEAN or Japan.
However, many of these companies had kept their dependence on China relatively low from an early stage, and therefore only a limited number of companies can take the same approach immediately.
■ For the majority of companies, the reality is “adjusting dependence”
For many companies:
Dependence on China is high
Components and processes are concentrated in China
Sunk costs are large
Cost alternatives are difficult
For these reasons, a complete withdrawal in a short period is not realistic.
Therefore, the mainstream approach is shifting from “complete withdrawal” to “gradually adjusting the level of dependence.”
■ India as the final option, with Japan and ASEAN as bridging bases
Recent trends suggest that many global companies are considering full‑scale transfer to India in the long term.
However, because India cannot immediately serve as a receiving base, Japan and ASEAN are being reevaluated as bridging hubs.
Japan: quality, stability, customer proximity, automation investment
ASEAN: labor force, cost, geographic diversification
While relying on this dual structure, more companies appear to be waiting for India to mature.
■ Summary
Although the term “de‑China” sounds strong, in reality only a limited number of companies are pursuing complete withdrawal, and for the majority, “adjusting dependence” is the practical approach.
Some companies, such as SUZUKI, have achieved complete withdrawal
Many companies focus on gradual adjustment
There is a movement to utilize Japan and ASEAN while keeping India in view for the long term
By combining these options, companies are being required to rebuild an optimal production configuration that fits their own circumstances.
■ Contact
If you need individual consultation on how your company should organize and review its approach to reducing dependence on China or restructuring production bases, please feel free to contact me at the address below.
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