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The China+1 Moment: Betting on Diversification Before the Crowd
In 2008, China was the obvious play. India's regulatory maze and Vietnam's opacity seemed irrational bets. Chris Devonshire-Ellis expanded anyway—when "people thought we were nuts." A decade later, clients scrambling for China+1 alternatives discovered Dezan Shira's India and Vietnam offices were seven and nine years mature. The contrarian diversification became the firm's competitive moat.
In 2008, the obvious play for Asian professional services was doubling down on China. The economy was growing faster than India’s. Regulatory frameworks were becoming clearer. Foreign investment was accelerating. Western firms concentrated resources in Shanghai, Beijing, and Guangzhou—the safe bets where returns seemed guaranteed.
Transformation Arc
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
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. State-by-state tax variations created compliance nightmares. Client acquisition required building relationships that took years rather than months. Western firms entering India discovered local competitors with decades of regulatory knowledge.
Vietnam’s opacity presented different challenges. The legal framework for foreign investment was evolving rapidly. Interpretation of regulations varied by official. 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.
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.
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. The contrarian bet became a structural advantage.
The Lesson for Founders
The China+1 story offers a framework for thinking about diversification timing:
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.
Investment Implications
For investors evaluating emerging market service firms, the China+1 pattern suggests screening criteria:
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 Global South brands:
Russian wineries that maintained export relationships before 2022 sanctions now have channels competitors can’t access. 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.
The common thread: diversification before consensus, investment before obvious return, positioning before crisis.
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.