The China+1 Moment

Chris Devonshire-Ellis did something different. He opened offices in Mumbai and New Delhi.

“Several years ago we made the decision to expand out of China and into other markets like India, Vietnam and so on,” he later explained. “At the time people thought we were nuts, but I wanted to lessen the impact of any China problems.”

The skeptics had reasonable arguments. India’s regulatory environment was genuinely opaque. Vietnam’s market was a fraction of China’s size. Splitting resources across multiple jurisdictions meant diluting expertise and stretching management thin. The Big 4 firms concentrated their Asian operations in established markets rather than spreading into uncertain territories.

A decade later, the trade war arrived. And suddenly “nuts” looked like genius.

The contrarian thesis

Several years ago we made the decision to expand out of China and into other markets like India, Vietnam and so on. At the time people thought we were nuts, but I wanted to lessen the impact of any China problems.

The 2008 diversification wasn’t random risk-taking—it reflected lessons learned from the 1997 Asian Financial Crisis. That crisis had wiped out nine months of Dezan Shira’s projected income and driven the five-year-old firm into temporary insolvency. The survival experience taught something the textbooks couldn’t: concentration risk compounds during crises.

Before 1997, the firm operated only in China. The Asian Financial Crisis hit Hong Kong hard—but China’s structural position (huge capital reserves, non-convertible currency, locked-in foreign investment) provided some insulation. The lesson was ambiguous: was China a safe haven, or would the next crisis hit differently?

By 2008, Devonshire-Ellis had spent 16 years building China operations. The natural instinct was to keep investing in proven success. Instead, he asked a different question: “What happens if something goes wrong with China specifically?”

The answer drove expansion into India and Vietnam—markets different enough from China that problems affecting one wouldn’t necessarily affect the others. The diversification wasn’t about finding better markets. It was about finding uncorrelated markets.

What “people thought we were nuts” actually means

The criticism of the 2008 expansion was substantive, not just skeptical:

India’s regulatory complexity genuinely deterred professional services firms. The GST system didn’t yet exist—India operated under a patchwork of central excise, state VAT, service tax, and octroi duties that varied not just by state but by municipality. A company establishing operations in Maharashtra faced different compliance requirements than one in Karnataka, and a firm advising clients needed expertise in both. Transfer pricing rules were tightening. The Foreign Exchange Management Act imposed layers of approval that changed depending on the sector, the investment amount, and the nationality of the investor.

Client acquisition compounded the difficulty. India’s business culture ran on relationships built over years, not quarters. The Big 4 had spent decades cultivating those networks. A Hong Kong-based firm arriving in 2008 was starting from zero in a market where trust accrued slowly and competitors had generational advantages.

Vietnam’s opacity presented different challenges. The legal framework for foreign investment was evolving rapidly—sometimes between the time an advisory opinion was issued and the time a client acted on it. Interpretation of regulations varied by official and by province. Market size couldn’t justify the overhead that China operations generated. Most Western professional services firms treated Vietnam as a future opportunity, not a current priority.

Resource dilution was mathematically real. Every dollar and hour invested in India or Vietnam was a dollar and hour not invested in China—where the firm had 16 years of relationships, deep regulatory expertise, and proven client acquisition channels. Competitors that stayed China-focused could deepen while Dezan Shira was spreading thin.

The critics weren’t wrong about the costs. They were wrong about the risks of not paying those costs.

The trade war proof point

When US-China trade tensions escalated in March 2018, clients faced an immediate problem: supply chain concentration in China was suddenly a liability rather than an efficiency.

The “China+1” strategy—maintaining China operations while establishing alternatives in India, Vietnam, or other markets—became urgent. Companies that had optimized for China-only operations needed professional services support to evaluate alternatives, establish entities, navigate regulatory requirements, and manage multi-jurisdiction operations.

Most Western professional services firms scrambled to build the capabilities clients suddenly needed. Dezan Shira didn’t scramble. The India operations were ten years mature. Vietnam was nine years established. The firm had already made the mistakes, built the relationships, trained the staff, and developed the regulatory expertise that competitors were just beginning to acquire.

“Dezan Shira has survived SARS, two financial crises, and numerous political difficulties in China, and the trade war is just another in a long line,” Devonshire-Ellis observed. “It will have limited impact on our business, clients will adapt and come up with solutions to their problems. If they can’t do business in China we can service them throughout Asia instead.”

That “instead” represented a decade of contrarian investment paying compound returns.

When COVID doubled the bet

The trade war validated Dezan Shira’s diversification. The pandemic made it essential.

In early 2020, China’s factory shutdowns exposed a vulnerability that tariffs had only hinted at: physical supply chain concentration. Companies that had treated China+1 as a hedge against trade policy suddenly discovered they needed it as insurance against operational disruption. When Wuhan locked down, manufacturers with single-source Chinese suppliers lost weeks of production with no fallback. Those with Vietnamese or Indian alternatives shifted orders within days.

The pandemic compressed what might have been a five-year migration into eighteen months. Boardrooms that had debated China+1 as a strategic option in 2019 treated it as an operational imperative by mid-2020. Vietnam’s electronics sector absorbed a wave of Samsung and Intel capacity. India’s pharmaceutical manufacturing, already substantial, became a focal point for companies rethinking API sourcing after supply shortages revealed dangerous dependencies.

For Dezan Shira, this acceleration meant a second surge of demand for exactly the capabilities the 2008 expansion had built. The trade war had driven inquiry. COVID drove action. Clients who had been evaluating India and Vietnam now needed entity formation, regulatory compliance, and workforce management—services that required the kind of on-the-ground institutional knowledge that only years of operation could produce.

The firm’s competitors faced a compounding problem. Building a Vietnam practice during a pandemic—when travel was restricted, in-person relationship building was impossible, and local regulatory authorities were overwhelmed—was far harder than building one in 2009. The cost of late entry had increased at precisely the moment demand for the capability spiked. What had been a competitive advantage in 2018 became something closer to a structural moat by 2021.

The publishing advantage

The diversification wasn’t just offices—it was knowledge infrastructure. When Dezan Shira expanded into India and Vietnam, the firm simultaneously launched India Briefing and Vietnam Briefing, extending the content marketing engine that China Briefing had established since 1999.

By 2018, the Asia Briefing network included seven regional publications reaching 20+ million annual readers. Clients evaluating China+1 alternatives discovered Dezan Shira had been publishing authoritative market intelligence on India and Vietnam for nearly a decade. The thought leadership established credibility that competitors launching new market coverage couldn’t match.

The content strategy reflected the same philosophy as geographic diversification: invest early in capabilities you’ll need later, even when current demand doesn’t justify the investment.

Supply chain engineering as service category

Today, Dezan Shira explicitly markets “Supply Chain Engineering” services addressing “disruptions like the US-China trade war, the Russia-Ukraine conflict, and pandemics” that “exposed risks of over-reliance on single markets.”

That service category exists because the 2008 diversification created the operational infrastructure to deliver it. Advising clients on China+1 strategies requires deep expertise in multiple markets—exactly what a decade of India and Vietnam operations developed.

The Big 4 firms have subsequently built similar capabilities. But Dezan Shira’s decade head start means institutional knowledge, client relationships, and operational maturity that new entrants take years to develop. A partner at a Big 4 firm opening a Vietnam advisory desk in 2019 was hiring local staff for the first time. Dezan Shira’s Hanoi team had been navigating Vietnamese investment licensing for ten years and had seen the regulatory framework evolve through multiple revisions. That depth of knowledge—the kind that comes from handling edge cases, building relationships with provincial officials, and watching client operations succeed or fail over a full business cycle—cannot be acquired through recruitment alone.

The contrarian bet became a structural advantage.

The founders who diversified first

The China+1 story offers a framework for thinking about diversification timing—one that applies well beyond professional services.

Diversify before consensus recognizes the need. When everyone agrees diversification is necessary, the best opportunities are already crowded. Dezan Shira’s India and Vietnam expansion happened when those markets seemed unnecessary—which is precisely why they were available.

Accept that early diversification looks irrational. “People thought we were nuts” is the sound of contrarian positioning. If diversification seems obviously correct, you’re probably too late.

Build for the crisis you can’t predict. The 2008 expansion wasn’t designed for the 2018 trade war specifically—Devonshire-Ellis couldn’t have predicted that particular crisis. The diversification simply reduced concentration risk, creating resilience against whatever crisis eventually arrived.

Time compounds expertise. A decade of India operations doesn’t just mean ten years of experience—it means relationships, regulatory knowledge, staff training, and market understanding that accumulate nonlinearly. Competitors can match your headcount; they can’t match your institutional knowledge.

What investors missed

The firms that didn’t diversify tell the other half of this story. Several mid-tier Western advisory practices that built profitable China-only operations through the 2010s found themselves structurally exposed when the trade war hit. They had deep Shanghai networks, strong renminbi revenue, and no fallback. When clients asked for Vietnam entity formation or Indian regulatory guidance, these firms had two options: refer the work to competitors or attempt to build capability under pressure. Either choice eroded the client relationship.

The pattern extended beyond professional services. Manufacturing consultancies that had optimized exclusively for Chinese supply chains discovered their expertise was suddenly a constraint rather than an asset. The knowledge that made them valuable in Shenzhen did not transfer to Ho Chi Minh City or Pune. Clients needed advisors who understood both ends of the migration—the China operations being restructured and the India or Vietnam operations being built. Firms with a single-market footprint could only advise on half the problem.

For investors evaluating emerging market service firms, the China+1 pattern suggests a set of questions worth asking:

When did diversification begin? Firms that diversified before 2018 demonstrate strategic foresight. Firms that diversified after 2018 were reacting to obvious pressure.

How mature are secondary market operations? Ten years of India experience is qualitatively different from three years. Institutional knowledge compounds over time.

Did diversification include knowledge infrastructure? Publications, research capabilities, and thought leadership in secondary markets signal deep commitment rather than superficial hedging.

What crisis drove the diversification decision? Dezan Shira’s 1997 near-insolvency experience drove the 2008 diversification. Firms that learned from crisis tend to diversify earlier than firms that haven’t been tested.

The China+1 moment revealed which firms had prepared for disruption and which were scrambling to catch up. That preparation—the willingness to invest in “irrational” diversification before the need was obvious—separated the resilient from the reactive.

The pattern across markets

Dezan Shira’s China+1 story isn’t unique—it’s exemplary of a broader pattern among crisis-tested emerging market firms that diversified before they had to.

Consider the parallel in manufacturing. When Apple began shifting a portion of iPhone production to India in 2020, the companies best positioned to capture that work were Foxconn and Pegatron plants that had established Indian operations years earlier—not in response to trade tensions, but as part of quiet capacity-building programs launched in the mid-2010s. Suppliers that waited for Apple’s formal diversification mandate found themselves competing for factory space, permits, and trained workers in a seller’s market.

The pattern repeats across sectors and geographies. Russian wineries that maintained export relationships with Middle Eastern and Asian distributors before 2022 sanctions now have channels competitors can’t access. Georgian wine producers who invested in Chinese market development during the 2000s—when Russia was the obvious and dominant customer—weathered Russia’s 2006 import ban with revenue streams already flowing from Shanghai and Beijing. Ethiopian coffee cooperatives that built direct trade relationships before commodity price crashes maintained margins when intermediaries collapsed. Vietnamese manufacturers that invested in quality certifications before sustainability became mainstream captured premium markets early.

Turkish textile firms offer another instructive case. Companies like Kipaş and Söktaş that established sourcing relationships with European fast-fashion brands during the 2000s—when Chinese suppliers dominated on price—found themselves perfectly positioned when brands began nearshoring after 2020. Turkey’s geographic proximity to Europe, which had been a marginal advantage for a decade, became decisive when shipping costs tripled and delivery speed mattered more than unit cost.

The common thread: diversification before consensus, investment before obvious return, positioning before crisis. In each case, the firms that benefited most were not the ones that read the market correctly in the moment of disruption. They were the ones that had made bets years earlier that looked, at the time, like unnecessary cost.

For founders building in emerging markets today, the question isn’t whether to diversify—it’s whether to diversify now, when the costs seem unnecessary and the benefits seem speculative.

The firms that survive the next disruption are making “irrational” investments today.

Last updated: April 30, 2026