Sourcing from China still makes sense, but it’s changing
China remains a critical part of global supply chains, despite rising costs and geopolitical challenges. For decades, it has been the world’s manufacturing powerhouse, offering unparalleled production scale, skilled labour and infrastructure. No other market replicates China’s manufacturing ecosystem at this scale.

For many companies, China continues to be an essential sourcing base across consumer and industrial sectors. However, the structure of global trade is shifting, and so should your sourcing approach.

What’s changed?
More geopolitical and trade pressures
While many courties maintain a strong trade relationship with China, global developments such as US-China trade friction and EU export controls, have created ripple effects. These developments could raise material costs, delay export approvals, or trigger new compliance requirements that affect your companies sourcing from China.

Increased supply chain disruptions
Events like natural disasters, pandemics, geopolitical tensions and labour issues have caused production delays. This has resulted in surging costs across ingredients and logistics plus inventory shortages.

Rising production costs in China
Labour expenses and compliance requirements on safety and the environment have increased. Businesses need to adjust their cost expectations.

Stronger ESG and compliance demands
Customers, regulators and investors increasingly expect responsible sourcing – from ethical labour to reduced carbon footprints. Chinese suppliers vary widely in these capabilities, so careful evaluation and selection is essential.

Digitalisation of sourcing
Online sourcing platforms, virtual factory audits and remote quality inspections now allow greater visibility and efficiency – if used correctly.

Build resilience into your China sourcing strategy
To deal with the above challenges, you are suggested to:

Model disruption scenarios
Test “what if” situations (e.g. freight cost spikes, key port closures) to stress-test your supply chain strategy and plan mitigation measures upfront.

Diversify routes and supply base
Avoid over-reliance on a single freight forwarder, port or supplier. Consider:

Dual sourcing for core items: develop at least two qualified suppliers for critical SKUs, even if one only supports smaller volumes.

China+1: build one alternative supplier outside China.

Strategic inventory: keep safety stock for high-impact products where switching suppliers is slow or not feasible.

Stay close to policy developments
Monitor trade and regulatory updates in China, the US and Europe, as they can have knock-on effects for your exporters and importers.

When to source from China and when to apply China +1?
Continue sourcing from China when scale, ecosystem maturity or innovation matter the most in your production.

Scale manufacturing is common for high-volume items such as packaging, food ingredients and textiles. Chinese suppliers still deliver competitive pricing and turnaround on these items.

A mature ecosystem is especially needed in sectors like electronics, vehicles, machinery and equipment. China remains the only place with complete industrial clusters concentrated with decades of expertise.

Innovation capability makes sense when you need design or R&D input without an in-house team. Many manufacturers in China, especially in consumer electronics and FMCG, are able to co-develop and optimise your products.

China +1
However, consider diversifying suppliers or origins rather than relying solely on China when:

You source highly cost-sensitive, bulk commodities like iron and steel products, grains, soybeans, chemicals or base materials. These items are more exposed to tariffs, export controls, energy costs and currency changes.

Resilience is crucial to your business, especially when supply chain disruptions could significantly affect operations or when key materials are sourced solely from China.

Many businesses now balance China’s strengths with alternate sourcing bases in Southeast Asia, South Asia, South America or Eastern Europe to maintain flexibility and resilience.

Define your China sourcing strategy
A sourcing strategy is not a one-off deal. A strong strategy should:

clarify your priorities and risk appetite early

choose sourcing models suited to your product type and scale

balance trade-offs (cost vs. speed, quality vs. flexibility).

Key considerations
To develop your China sourcing strategy, begin by considering the following 5 factors and identifying your key priorities:

1. The landed cost, including tariffs, duties and freight, which often makes up the bulk of total expenses and heavily influences sourcing decisions, especially for high-volume, low-value goods such as packaging materials, fasteners, labels and tape.

2. Quality must come first if you are a consumer-facing, brand-driven business. For example, a children’s toy brand should demand strict compliance with international safety standards from suppliers, as even tiny variances can expose companies to reputational or legal damage.

3. Turnaround time can outweigh costs for categories such as fashion or promotional merchandise, especially during peak seasons like Christmas. Ensure you have sufficient stock to deal with sudden demand.

4. Innovation can be weighed in if your brand depends on differentiation. You can co-develop products with capable Chinese manufacturers to accelerate market-entry.

5. Resilience should be a priority if delays in shipments from China could disrupt your operations. This highlights the importance of diversifying supply sources and maintaining stock buffers to reduce risk.