How Companies Are Executing a China Plus One Hiring Strategy Across APAC in 2026

Introduction

In recent months, it has become increasingly common to hear of leadership deciding to phase part of the supply chain out of China. The China plus one hiring strategy is no longer a future-state plan. Companies are executing it now.

New markets like Vietnam, Malaysia, Indonesia, and India are being chosen for their talent, manufacturing capabilities, and efficient operating costs, but also for their improving infrastructure, growing middle-class workforces, and increasingly business-friendly regulatory environments.

For those encountering the term for the first time: the China plus one hiring strategy is a dual-market approach. Aside from China, companies add a second operational base alongside it.

The reason? While it’s true that Chinas manufacturing ecosystem remains one of the most sophisticated in the world, with unmatched supply chain depth, skilled industrial labour, established logistics networks, and direct access to the largest consumer market in the world, the China plus one hiring strategy ensures that operations do not come to a halt due to to unexpected events.

This is the downstream consequence of geopolitical tensions, tariff pressures, and hard lessons learned from pandemic-era disruptions. Take the recent US-China trade wars: the Trump administration raised tariffs on Chinese imports by 20% within the first seven weeks of taking office. By mid-2025, the average US tariff on imports from China had reached nearly 50 percent, with China retaliating in kind.

As of March 2026, both sides have launched fresh trade investigations into each other’s practices despite temporary truces. There seems to be no clean end to this shift, and many companies are rethinking the risks of over-concentration in a single market.

For companies already manufacturing in China, the question of where else has largely been answered. The harder questions, such as which market to prioritise, how to sequence expansion alongside existing China operations, and how to hire legally without compliance exposure, are where most HR teams are still catching up.

What the China Plus One Strategy Actually Means

Some may assume that the China plus one strategy means that companies are exiting China. That is simply not true. What the strategy addresses is a specific vulnerability: the risk that comes from having 100% of production, sourcing, or a critical workforce function concentrated in a single geography.

Think things like:

• Relocating tariff-exposed manufacturing: moving production that is directly subject to US-China tariffs to a lower-tariff jurisdiction, while keeping higher-complexity or domestically consumed production in China
• Adding redundancy: creating a parallel capability in a second market so that a disruption in China does not bring the entire operation down
• Accessing lower labour costs: for labour-intensive roles where cost arbitrage is significant, while retaining China for roles requiring deeper specialisation or proximity to the Chinese consumer market
• Diversifying regulatory exposure: so that a single regulatory or political event cannot affect the full workforce

As such, it’s safe to say that the China plus one hiring strategy is the defining workforce trend of 2026. Labour costs in China are roughly three times higher than in Vietnam and five times higher than in Indonesia. That gap, combined with sustained tariff pressure, has pushed investment decisions that were once theoretical into active headcount planning.

A McKinsey report details the most prominent trends: electronics growth in Vietnam, and metals and chemicals expansion in Indonesia. Foxconn and CoreTek, major electronics manufacturers for Apple, have begun relocating operations to Vietnam. Chip companies have expanded across the Singapore-Malaysia-Indonesia corridor.

Choosing Your Plus One Market: Top Countries To Hire in APAC

Not every market suits every expansion objective. The right entry point depends on sector fit, risk appetite, and how quickly the business needs operational headcount. Companies frequently underestimate the complexity of running parallel operations across China and a new market simultaneously – think managing separate compliance frameworks, payroll cycles, and HR policies while maintaining quality and output.  

The table below maps the four most active China plus one destinations against the factors that matter most to HR leaders making an initial market decision.

The APAC region holds fast-growing investment opportunities across 15+ countries, with competitive labour markets and, in many cases, strong government incentives that support long-term expansion.  

Here are the markets seeing the highest demand:

Vietnam

Vietnam is the single largest beneficiary of supply chain rebalancing in Southeast Asia. Electronics, apparel, footwear, and furniture manufacturing have all seen significant investment inflows. Vietnam’s average manufacturing wages are roughly half of China’s, and the government has actively positioned the country as an investment destination through free trade zones, tax incentives, and infrastructure investment, with an additional $117 billion in infrastructure projects planned for 2025 to 2030.

The compliance challenge for HR leaders is real. Vietnam has strict requirements around labour contracts, social insurance contributions, and probationary periods. Companies that want to hire employees in Vietnam without establishing a legal entity face genuine compliance exposure, which is why employer of record structures have become the default starting point for companies testing the market before committing to entity incorporation.

Indonesia

Indonesia is attracting investment in nickel processing, EV battery supply chains, and general manufacturing. A growing share of foreign direct investment (FDI) flowing into APAC is now directed toward manufacturing, particularly in countries with young populations like the Philippines, Indonesia, and Vietnam.

Indonesia’s regulatory environment is layered with regional variations in minimum wage, sector-specific union requirements, and termination rules that differ materially from most other APAC markets. For foreign employers, local compliance expertise is not optional.

Malaysia

Malaysia offers English-language proficiency, strong technical talent in semiconductors and electronics, and a relatively straightforward business environment. Malaysia’s exports rose from $280 billion in 2019 to $370 billion in 2023, underpinned by continued FDI in high-tech manufacturing, particularly in the Penang corridor. Companies looking to hire in Malaysia without a local entity are increasingly turning to employer of record solutions as the fastest compliant path.

India

India sits in a different category. Its role in the rebalancing story is primarily in technology, back-office functions, and high-value manufacturing. Lenovo, for example, is now manufacturing AI servers in India, with plans to assemble 50,000 AI rack servers and 2,400 GPU servers annually at its Puducherry facility, alongside an AI-focused R&D lab in Bengaluru.

India’s employment compliance framework, covering Provident Fund, ESIC, state-level minimum wages, gratuity, and the Labour Codes, is genuinely complex for foreign employers without local expertise. Getting this wrong creates both financial and reputational risk.

Three Things to Resolve Before the First APAC Hire

Most APAC expansion problems do not start with the wrong market. They start with wrong assumptions about how quickly hiring can happen once a market has been chosen. These three questions need answers before headcount planning begins.

1. What is the legal employment structure?

Hiring through your own entity, a professional employer organisation (PEO), or an employer of record each carry different cost, timeline, and risk profiles. Entity incorporation in most APAC markets takes three to nine months. If the business has set a 60-day hiring target, the structure question has already been answered by default. The issue is whether HR is making that call deliberately or inheriting it.

2. What are the in-country compliance obligations?

Minimum wage floors, statutory leave entitlements, social contribution rates, and termination notice periods vary significantly across the region and cannot be mapped from one market to another. Each country requires its own configuration, not an adaptation of wherever the company hired last.

3. Where is the talent, and what does it actually cost?

Salary benchmarks, notice period norms, and offer acceptance rates differ materially by market and function. A hiring timeline built on assumptions rather than local data will miss, every time.

Why AYP Group Stands Out for APAC Expansion

AYP Group’s employer of record platform enables companies to hire, manage, and pay employees across 13+ APAC markets without waiting for entity incorporation and without the compliance exposure that comes from informal or misclassified arrangements. It is the most practical infrastructure for companies in the early phase of market entry.

AYP Group’s service differentiation centres on three core principles: guaranteed compliance with no penalties, complete price transparency with no hidden fees, and comprehensive advisory support that extends beyond basic employment administration to include strategic guidance on market entry sequencing and in-country HR best practices.

Authorities across Asia are reviewing employment documentation more carefully, particularly as cross-border hiring volumes increase. Having a compliant, tech-enabled employment infrastructure is no longer a nice-to-have for companies operating in multiple APAC markets simultaneously.