ABSTRACT
This chapter examines the China-plus-one diversification strategy that has been adopted by some Japanese multinationals. It discusses the relevant International Relations (IR) theory and provides a review of the literature on political risks and foreign direct investment (FDI) in management studies. The chapter describes the independent variable – namely, political and non-political risks that are driving the phenomenon of China-plus-one. There are two parts to China-plus-one – the first part being a slowdown or decrease in Japanese FDI in China and the second being an increase in Japanese FDI in Southeast Asian and South Asian countries. Economic sanctions are the most common economic instrument at the state's disposal in pursuing economic statecraft. 'China-plus-one' refers to a Japanese corporate diversification strategy. Japanese FDI boomed in the wake of the Plaza Agreement of 1985. Japanese multinational manufacturing firms in Malaysia began to use the phrase 'China-plus-one' in 2003, following the severe acute respiratory syndrome (SARS) epidemic in China.
