Since replicating China's manufacturing ecosystem is an uphill task, more manufacturers are returning to the country a year after moving out to avoid higher US tariffs.
Businesses are still investing in the industrial centres of Southeast Asia, but it has been more difficult to implement the "China plus one" initiative, which required businesses to hedge their exposure to China by operating in other nations with lower tariffs, Reuters reported.
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Although specific statistics regarding the amount of sourcing that is returning to China is still lacking, some buyers who moved production overseas stated that they are retaining or reestablishing Chinese suppliers because foreign factories are unable to match China's trained labour, supplier networks, and dependable power.
US retailer Target has shifted certain orders back to Chinese suppliers, citing production limitations and supply-chain delays, the report said. The duration and value of the orders were not disclosed by the sources.
People familiar with Shein's operations in Vietnam reportedly said the Chinese fast-fashion retailer is also reducing some of its operations there.
According to Jin Chaofeng, an outdoor furniture exporter from Hangzhou, eastern China, he closed a workshop in Ho Chi Minh City that he had opened in 2024 and returned production to China this year.
He noted that he was unable to locate the necessary equipment in Vietnam and that he had to import necessities from China, including screws and cup holder moulds.
Chaofeng claimed that the math that had previously supported relocating overseas had altered. "Once I factored everything in, the overall cost was not much different, so there was no point."
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According to estimates from the Economist Intelligence Unit in July, China faced an effective U.S. tariff rate of almost 20%, compared with 6.1% for Vietnam, 13.4% for Indonesia, and 4.5% for Thailand. However, as Washington expanded tariffs to more nations, that advantage has diminished, leading some Chinese manufacturers to reconsider foreign investment, according to the EIU.
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