Over half of Japanese firms operating in Vietnam and India have plans to expand their local operations, according to a recent online survey released on February 7 by Kyodo News of Japan. 

The move therefore signals a shift towards reducing reliance on China as a production base, in a strategy that is known as "China plus one".

In the online survey conducted last December by Japanese staffing firm Pasona Group Inc., 57% of Japanese enterprises based in Vietnam and 55% of those operating in India stated their intentions to expand operations in the host countries, compared with an average of 39% among all 11 countries and regions polled.

In contrast, Japanese firms in Hong Kong (China) had the lowest rate with only 13%. This follows the deterioration in the local trading environment following China's dismissal of pro-democracy lawmakers, along with crackdowns on democracy activists, according to the survey.

Of the 818 companies polled, a total of 67% outlined their plans to keep the current level of their bases and operations in the 11 economies.

Furthermore, 20% of respondents said they plan to add and strengthen the functions of their bases to serve as regional headquarters, partly due to difficulties faced whilst making business trips to and from their head offices in Japan amid the novel coronavirus (COVID-19) pandemic, the survey said.

With Southeast Asian countries being hit hard by the economic impact of the pandemic, 30% of Japanese companies in Thailand, 28% in Malaysia, and 22% in Hong Kong (China) said they have been forced to cut staff or plan to do so within the next three months. Indeed, the average across all respondents stood at 16%.

Moreover, the rapidly-growing trend of remote work brought about by the pandemic, coupled with real estate prices, has also encouraged firms to downscale their offices, with at least 15% in Hong Kong (China), Singapore, and Indonesia saying they have plans to do so.

As part of the “China plus one strategy”, 43% of respondents in Vietnam said they have expanded their offices or have plans to implement such changes.

Most notably, 74% of those questions in the 11 economies cited a lack of communication between employees as an issue of concern with regards to remote working, followed by 59% who cited performance evaluation of staff.

The economies covered by the surveys include the United States, Canada, Hong Kong (China), Taiwan (China), the Republic of Korea, Thailand, Vietnam, Malaysia, Singapore, Indonesia, and India.