China+1: Are German Buyers Actually Shifting Supply Chains?
Introduction
“China+1” has been around for long enough that it could become a cliché. This is a strategy that gets talked about so much in boardrooms and consulting reports that the actual implementation of it sometimes gets lost in the discussion. The main point is simple: businesses should add at least one other country to their supply chain so they don’t rely too much on one China-based supply chain. What used to be a backup plan has now become a declared strategic imperative because of the trade war between the U.S. and China, the COVID-19 pandemic, and ongoing geopolitical tensions.
Germany is in a strange place in the middle of this debate. It is the European country that is most closely connected to China. Not only does it buy Chinese-made goods, but it also sells industrial capital goods, is a major investor in China, and has major industries (automotive, chemicals, machinery) that have built up deep, decade-long dependencies on Chinese supply chains and demand. So, when the topic of de-risking and diversification comes up, it’s important to get a data-based answer to the question of whether German buyers are really moving and not just talking about moving.
This article looks at what the proof from 2024 and 2025 really shows. The answer is more complicated than either the “German industry is stuck in China” story or the “everyone is moving to Vietnam and India” story. Both are partly true, and the real insight into the supply chain comes from knowing the difference between the two.
The Scale of Germany’s China Dependency
It is important to set a baseline before trying to figure out if a change is happening. China is Germany’s biggest single import partner, making up about 10.9% of all German imports, or about €160 billion a year. That concentration is even stronger in manufacturing, where China gets a lot of electronic and electromechanical parts, precision parts, and intermediate industrial goods. For Germany’s auto industry alone, supply chain exposure to Chinese components runs from basic wiring harnesses to advanced battery cells.
Between 2015 and 2023, German imports from China rose by more than 40%. And the bilateral trade relationship remains structurally significant: in 2025, total China–Germany trade reached 1.51 trillion yuan (approximately $217.8 billion), up 5.2% year-on-year. China regained its position as Germany’s single largest trading partner that year, a status it had held from 2016 to 2023 before being briefly overtaken by the United States in 2024. Mechanical and electrical products alone accounted for 70.8% of bilateral trade volume in 2025.
| Indicator | Data / Status |
| China’s share of German imports (2024) | ~10.9% of all imports, approx. €160 billion |
| Germany–China bilateral trade (2025) | 1.51 trillion yuan (~$217.8 bn); +5.2% YoY |
| China’s ranking as Germany’s trade partner (2025) | Largest trading partner, regained after 1-year gap |
| German FDI in China (Jan–Nov 2025) | Reached 4-year high |
| German Chamber Survey: firms staying in China (2024/25) | 92% plan to continue operations in China |
| German firms planning to increase China investment | ~51% over next two years; 87% cite competitiveness |
German investment in China has concurrently been shattering records. In the first half of 2024, German FDI in China reached €7.3 billion — a pace that rendered Germany responsible for approximately 65% of all EU foreign direct investment into China from 2022 through mid-2024. In the months that followed, that number went up much more. In November 2025, BASF’s huge integrated production plant in Zhanjiang, Guangdong, which is the company’s biggest investment in the world, started making its first core goods. Mercedes-Benz put $2 billion into making new electric vehicles just for China. Volkswagen bought more shares in XPeng. Continental put €16 million on a new research and development center in Qingdao.
Germany is not pulling away from China, at least not when you look at capital flows. The biggest industrial companies in Germany have been doubling down, if anything. The 2024/2025 Business Confidence Survey from the German Chamber of Commerce in China indicated that 92% of member companies want to keep doing business there. About half of those companies aim to invest more in the next two years.
Why China+1 Is Gaining Traction Anyway
It is possible to explain the paradox. Germany’s big companies can afford to spend a lot of money on China and develop up supply capacity in other places at the same time. But for the larger group of German mid-sized enterprises, especially the Mittelstand manufacturers that are the backbone of the German economy, the economics are more limited. And it is among this group of enterprises, who have revenues between €50 and €500 million and often source goods from only one nation, that China+1 thinking is having the most direct impact on how things are done.
The drivers are well-known, but they have gotten stronger in 2024 and 2025. The EU’s decision to put tariffs on electric cars built in China in October 2024 was a big step forward in trade tensions. As Chinese suppliers’ landing prices rise, partly because of state-stimulated export pricing and partly because of unpredictable logistics, procurement teams are paying more attention to total cost modeling than just unit cost. And the Taiwan risk—the chance, though the timing is still unclear, of a confrontation that might stop production across East Asian supply chains—has gone from being a geopolitical thought exercise to something that needs to be talked about in the boardroom.
There is also the competitive threat angle, which doesn’t get enough emphasis in supply chain talks. The Chamber of Commerce asked every second German firm, and they all said that a Chinese company would be the most innovative in their field within five years. That is a risk in the market, not just in sourcing. Companies that have to compete with Chinese companies that are closing the technical gap in areas like sensors, software, and domain controllers have a reason to limit their financial exposure to Chinese supply chains, even if they are also competing in the Chinese market.
Where Is the “+1” Actually Going?
When German purchasers do look for different sources, the places they go to are not always the same and depend on the goods. Vietnam is now the most popular place to assemble electronics, textiles, and other consumer items. Between 2015 and 2023, Germany’s imports of printed circuit boards from Vietnam surged by 655%, going from $430,000 to $3.2 million. Imports of PCBs from Thailand went up 24% during the same time. These numbers are still minor compared to the amounts coming from China, but the trend is apparent.
| Sourcing Country | German PCB Imports 2015 | German PCB Imports 2023 | Change |
| Thailand | $68 million | $85 million | +24% |
| Vietnam | $0.43 million | $3.2 million | +655% |
| China | Dominant | Still dominant | Broadly stable but share under scrutiny |
India’s profile as an alternative has grown a lot, especially in the fields of pharmaceuticals, IT hardware, and some textiles. Apple’s proposal to move 15–20% of iPhone production to India and Vietnam by 2026, with over $1 billion in Indian manufacturing investment, has brought attention to the country’s rising capabilities, even though the overall supply chain depth is still not as good as China’s. India is more appealing to German procurement executives in certain areas because it offers regulatory predictability within the EU’s framework of preferential trade access.
Malaysia and its semiconductor cluster are nevertheless important to German electronics and industrial automation companies. More and more, people are thinking of Indonesia as a place to make things that need a lot of resources and supply parts for cars. Thailand has a long-established automotive ecosystem that builds more than two million vehicles a year. This makes it a reasonable place for German auto suppliers to look for places to grow regional capacity outside of China. Mexico is mostly important for US-based supply chains, but it is now becoming a topic of conversation in German businesses as nearshoring changes the way people think about global logistics.
| Country | Key Sectors | Avg. Manufacturing Wage vs. China | Key Risk |
| Vietnam | Electronics, textiles, footwear | ~50% of China’s | US tariff exposure (44–49% threatened in 2025); Chinese goods transshipment scrutiny |
| India | Pharmaceuticals, IT hardware, textiles | ~30–40% of China’s | Infrastructure gaps; complex regulatory environment |
| Malaysia | Semiconductors, electronics | ~60–70% of China’s | Smaller labor pool; US anti-circumvention scrutiny on semiconductors |
| Indonesia | Textiles, automotive, resources | ~40–50% of China’s | Infrastructure, local content requirements |
| Thailand | Automotive, electronics, food processing | ~55–65% of China’s | Political instability risk; 34% US reciprocal tariff (2025) |
| Mexico | Auto parts, electronics (nearshoring) | ~50–60% of China’s | Limited industrial depth for scale; US-Mexico trade politics |
The Complication: ASEAN Is Not Yet Standalone
A major problem with the clean China+1 story is that a lot of the items that come out of Vietnam and other Southeast Asian hubs still rely significantly on Chinese inputs. Vietnam’s electronics exports, which topped $100 billion and surged 48% in 2025, are mostly made up of parts that come from China. Foxconn, Intel, and Samsung have all put a lot of money into operations in Vietnam, but China still has most of the upstream materials and parts supply. One analyst put it bluntly: firms are relocating the assembly, not the supply chain.
This tension has been made very clear by US trade policies. Anti-circumvention investigations into Chinese-owned solar and aluminum businesses in Vietnam and Thailand have sent a message to corporations that use ASEAN as a way to get around China instead of as a real alternative. When German buyers are thinking about sourcing from Vietnam or Malaysia, they need to think about more than just the current landed costs. They also need to think about the regulatory trajectory, specifically whether EU or US customs authorities might see goods made from mostly Chinese inputs as effectively Chinese in origin.
The Reality on the Ground: What Major German Firms Are Actually Doing
Germany’s biggest industrial corporations all seem to be following the same plan: they are expanding their operations in China to meet demand there, while selectively developing capacity outside of China to meet demand there. This is frequently called “China for China,” which is a localization approach that protects Chinese operations from geopolitical problems by making sure they can work on their own. At the same time, it lowers the amount of German-bound goods that go via Chinese facilities.
| Company | Sector | Recent China Move | Diversification Activity |
| Volkswagen | Automotive | $700M investment in XPeng; co-developing 2 EVs for 2026 | Exploring ASEAN assembly for non-China markets |
| BASF | Chemicals | Zhanjiang integrated facility launched production Nov 2025 | Maintains global manufacturing footprint |
| Mercedes-Benz | Automotive | $2B investment in China-specific EV models (2025–2027) | India JV for local market |
| Continental | Auto components | €16M R&D center in Qingdao (2024–2025) | Selective Southeast Asia sourcing for non-China supply |
| Infineon | Semiconductors | Deepening China partnerships | Malaysia fab remains primary non-China production hub |
| Bosch | Industrial | Doubling down on China supply for Chinese OEMs | Expanding India manufacturing base |
Bosch and ZF Friedrichshafen, two of Germany’s biggest auto parts suppliers, have been growing their business in China and their ability to supply parts outside of China at the same time. The idea is that Chinese OEMs, which are increasing market dominance around the world and starting to export from China, are becoming more and more important customers for German tier-one suppliers. To serve them, you need to be in China. But to serve European or North American OEMs that are also lowering their risks, you need supply chain nodes outside of China. So the same German supplier can be getting bigger in Suzhou and also getting a new supplier in Pune.
Hermann Simon, a German economist who came up with the Hidden Champions idea, put it thus way: Chinese investment, especially in R&D, shows that they really value the abilities of German Mittelstand leaders, not that they are stuck in their ways. “China is not only catching up in innovations, but already leading in many sectors,” he told Xinhua during a March 2025 visit. This means that corporations who stay heavily invested in China are not avoiding risk; they are deciding that the cost of not being involved is higher than the cost of keeping involved.
“Diversification Fatigue”: Why Some German Firms Are Pulling Back From the +1 Plan
One of the more interesting pieces of information from recent study is what Rhodium Group called “diversification fatigue” among German business leaders. After looking at other markets over the previous several years, a lot of German business leaders decided that no other country can compete with China when it comes to costs, supply chain depth, logistical infrastructure, and the industrial ecosystem. Some firms who started China+1 pilot initiatives in Vietnam or India have quietly cut them back after finding that the quality, lead time, or availability of components did not reach the standards their customers expect.
This isn’t true for all products; it varies a lot on the type of product and where the buyer is in the value chain. A German clothing store that buys textiles can really replace Chinese production with Vietnamese or Bangladeshi production. A German company that makes machine tools and needs precise castings or high-tolerance parts has a lot fewer options that can match the requirements at a reasonable price. The more complex the part that is made, the fewer non-China vendors there are that can provide it.
The geopolitical situation has also changed in ways that make the straightforward de-risking story harder to tell. In 2024, German Chancellor Olaf Scholz went to Beijing. Since then, his successor has kept trade as a top focus in foreign policy. Some German economists have even started to call China the more reliable trading partner, which is strange because the Trump administration’s 2025 trade strategy has made US tariffs unpredictable and made US trade partnerships look unstable. Supply chain strategy doesn’t work in a political vacuum. Because US trade policy is unstable, some German purchasers are less willing to set up supply chains that are aligned with the US.
Managing the Transition: What Logistics Partners Bring to China+1 Execution
For businesses that have gone from planning to actually doing something in China+1, the logistics part is where the most risk is. When you get goods from both China and Vietnam or China and India, shipping and customs become more complicated. You have to deal with multiple bills of lading, different compliance frameworks, longer supplier qualification cycles, and comparing costs per unit across different modal and carrier options.
Topway Shipping, which has been in business since 2010 and is based in Shenzhen, has founded its firm at this exact spot. The company’s founding team has more than 15 years of experience in international logistics and customs clearance, with a focus on shipping from China. They are experts in cross-border e-commerce logistics solutions. For companies that use multi-origin sourcing strategies, like moving finished goods from a Chinese supplier while also developing a Vietnamese alternative, or dealing with seasonal demand peaks that need a mix of air, rail, and ocean freight, Topway has the operational continuity and compliance knowledge that multi-country sourcing needs.
Topway’s services cover the whole logistical chain, from the first leg of transportation from the plant or inland warehouse to the port of origin, to overseas warehousing at important distribution hubs in Europe and North America, to customs clearance at both the origin and destination, and finally to last-mile delivery. The company also offers flexible FCL (full-container-load) and LCL (less-than-container-load) ocean freight services from China to major ports around the world. This is especially useful for importers whose volumes from China haven’t dropped a lot, but whose order mix has changed—smaller, more frequent orders as inventory management becomes stricter. For German customers who really want to manage a China+1 supply base, having a logistics partner who knows a lot about how things work in China—rather than one who sees China as just one geography among many—gives them a real operational edge.
What Should German Buyers Actually Do?
The honest answer is that China+1 is not a one-size-fits-all solution. It is a framework that needs to be used for each category, taking into account the supply chain maturity of each product in other countries, the buyer’s willingness to take on transition risk, and the cost structure of the item in question. Procurement teams who use a risk-weighted scoring system to compare all of their sourcing possibilities instead than just trying to “reduce China to X%” tend to uncover more useful methods to do things.
Active diversification works best for products that have certain traits in common: they are labor-intensive to put together (which makes wage arbitrage relevant), they are moderately complex but not completely dependent on Chinese industrial clusters, and they are at risk of tariffs either in their final market or along their logistics route. Textiles, consumer electronics assembly, some plastic parts, furniture, and conventional electrical parts all fall under this category. The alternatives from Vietnam, India, and Malaysia are mature enough to support substantial sourcing strategies in these areas.
For goods that depend on China’s deep industrial ecosystems, like precision castings, specialty chemicals, and advanced electronics, where China’s supply depth is truly irreplaceable in the short to medium term, the more practical approach is resilience engineering within China. This means building safety stock, qualifying secondary Chinese suppliers, diversifying within China’s own regional manufacturing base, and structuring contracts to make sure prices are clear during disruptions. As many analysts have pointed out, it would take years and cost many times more than what it costs now to rebuild these supply chains outside of China. You have to make that trade-off honestly, not just disregard it.
Conclusion
Are German buyers really changing their supply chains? The answer is: selectively, on purpose, and with much less consistency than the main story says. Large German companies are making more investments in China while simultaneously building up their non-China capacity. This isn’t a contradiction; it’s a way to protect themselves in both markets. Mittelstand enterprises are branching out into certain areas where there are already good options, but they are stopping trying to diversify in areas where there aren’t any good options yet. And a significant number of German business leaders have come to the conclusion that no other choice delivers China’s combination of size, ecosystem depth, and reliable logistics—at least not yet.
The way we think about things is really changing. German purchasers used to see China as an uncontested default, but now they are actively asking the question. This is a change, even if the action that follows is small. The supply chains being constructed in Vietnam, India, and Malaysia right now are the first steps toward a change that will take ten years, not three months. The 655% rise in German PCB imports from Vietnam between 2015 and 2023 is a sign, but not a fundamental change yet.
For logistics companies, manufacturers, and procurement teams working in this environment, the most important skill is not choosing one future outcome—China dominant or ASEAN ascendant—but being able to work in both as the balance changes slowly and unpredictably. That is where the supply chain work will be done for the next few years.
FAQs
Q: What exactly is the China+1 strategy?
A: China+1 is the practice of adding at least one other country to the mix of suppliers, usually Vietnam, India, Malaysia, Indonesia, or Mexico, to strengthen the robustness of the supply chain and lower geopolitical risk.
Q: Are German companies actually reducing their reliance on China in 2024–2025?
A: Not all of them. Germany’s biggest industrial companies are investing more in China while also building up their capacity in other countries. German imports to Vietnam and other ASEAN markets are growing in certain product categories, such as PCBs, textiles, and electronics assembly. The change is considerably slower in industrial goods that need a lot of money.
Q: Which countries are the most viable China+1 alternatives for European buyers?
A: Vietnam is the best place for electronics assembly and textiles because of its low costs and existing foreign direct investment (FDI) infrastructure. India is getting better at making drugs and computer hardware. Semiconductors are a strong point for Malaysia. Thailand is a good place to get car parts. The proper decision relies a lot on the type of product and how mature the supply chain is in each area.
Q: What is ‘diversification fatigue’ among German firms?
A: Some German executives who looked at other markets came to the conclusion that no other country has the same combination of low costs, a strong industrial ecosystem, reliable logistics, and large scale as China. Some people have had to cut back on their intentions to diversify, especially in the case of complicated manufactured parts where alternatives can’t yet match quality or volume standards.
Q: How can Topway Shipping support companies managing China+1 logistics?
A: Topway Shipping offers full logistics services, including transportation on the first leg, customs clearance, storage overseas, and delivery on the last leg. Topway is a good partner for organizations who have supply chains that come from both China and other markets because it has a lot of experience with China logistics and offers flexible FCL/LCL ocean freight alternatives.
