China+1 Strategy Faces Limits as China Retains Manufacturing Edge, Says Axis Bank Chief Economist

The worldwide push to diversify offer chains far flung from China would possibly maybe maybe also merely be more aspirational than handy, on the least within the shut to interval of time, with China persevering with to dominate manufacturing at a scale few countries can match. This became highlighted by Neelkanth Mishra, Chief Economist at Axis Financial institution, while talking on the digital press convention for the disclosing of the India Economic & Market Outlook 2026 File.

Addressing questions about global manufacturing shifts, Mishra argued that the commonly mentioned China+1 strategy has inherent barriers on fable of China remains the main manufacturing corrupt for global corporations. He cited the automobile commerce as a telling instance. In November alone, China produced about 3.5 million vehicles. Annualised, this translates to nearly 42 million vehicles—around half of of total global automobile production.

World auto production on the total ranges between 85 and 90 million devices every twelve months, underlining the dimensions gap between China and the relaxation of the sphere. Beyond sheer volumes, China’s dominance extends all around the provision chain, collectively with auto map, electronics and batteries, particularly for electrical vehicles. This integrated ecosystem permits price efficiencies and velocity that different manufacturing hubs combat to copy.

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Whereas plenty of countries possess positioned themselves as beneficiaries of China+1—collectively with India, Vietnam and Mexico—the records suggests that these markets are serene taking part in salvage-up. India, as an illustration, produced roughly 5 million vehicles in FY24, making it one in every of the sphere’s quickest-rising auto markets but serene a fragment of China’s output. Though policy initiatives equivalent to production-linked incentives (PLI) possess boosted investment, scaling as a lot as China-indulge in ranges would require sustained capital expenditure, logistics upgrades and group growth.

Globally, corporations appear to be adopting a more nuanced device. In place of shifting production wholesale, multinational corporations are collectively with incremental capacity launch air China to hedge risks, while keeping China on the core of their manufacturing networks. This has resulted in diversification on the margins in place of a structural relocation.

Mishra’s remarks attain at a time when global markets remain centered on offer-chain resilience amid geopolitical tensions and commerce realignments. On the opposite hand, the records-pushed fact, as highlighted in Axis Financial institution’s financial outlook, suggests that China’s manufacturing dominance—particularly in capital-intensive sectors indulge in vehicles—continues to anchor global production, making China+1 an adjustment strategy in place of a factual different.