Vietnam likely to replace China as ‘factory of the world’
Vietnam is by some accounts likely to take over China as the “world’s manufacturing hub” amid lasting economic disruptions mainly caused by the Covid-19 pandemic and China’s unpredictable policies which have prompted international companies to reconsider their exposure to the country.
Supply chain issues have added to the woes as China continues to battle virus flare-ups in its major production hubs such as Guangdong province and Shanghai with the result that the delivery of factory orders has become unreliable.
In turn, Vietnam’s first quarter economic figures appear to show a much more promising outlook as the pandemic recedes in the country. In addition, cheaper land purchasing rights, labour wages and operational expenses for factories and warehouses have caught the attention of large electronics manufacturers in the past, such as Samsung, Foxconn and even China’s smartphone giant Xiaomi, alongside IBM, Microsoft, Nestlé, Procter & Gamble, Pepsico, Unilever, Nike and Honda, among others.
Faster growth than China
According to Vietnam’s General Statistics Office, the country’s economy expanded by around five per cent in the first quarter of 2022 over the same period last year, surpassing China which grew 4.8 per cent. Vietnam’s foreign trade rose to $176.35 billion in the period, a year-on-year increase of 14.4 per cent. In comparison, China’s foreign trade in the first quarter rose 10.7 per cent in yuan terms.
Moreover, foreign investors and other foreign-owned businesses keep pouring more money into the country of almost 100 million inhabitants with a large, decently educated and diligent workforce.
Historically, China began its economic reforms and opening-up in 1978. Vietnam followed China’s footsteps and started its own market reform known as “doi moi” in 1986. For the past decades, economic growth on both countries has been remarkable.
Geopolitical and macroeconomic challenges
But the onset of a trade war between the US and China in 2018 has accelerated a fourth wave of industrial chain transfers, with countries such as Vietnam and Mexico emerging as the biggest winners of the trade disputes.
Vietnam’s trade with the US has grown significantly since 2018. The latest data showed Vietnam’s trade surplus with the US rose to $81 billion in 2021 from $63 billion in 2020, hitting an all-time high.
Analysts expect that in the foreseeable future, Vietnam will continue to remain attractive for foreign investment and – most of all – a destination for supply chain diversification amid geopolitical macroeconomic challenges and insecurities.
Vietnam is by some accounts likely to take over China as the “world’s manufacturing hub” amid lasting economic disruptions mainly caused by the Covid-19 pandemic and China’s unpredictable policies which have prompted international companies to reconsider their exposure to the country. Supply chain issues have added to the woes as China continues to battle virus flare-ups in its major production hubs such as Guangdong province and Shanghai with the result that the delivery of factory orders has become unreliable. In turn, Vietnam's first quarter economic figures appear to show a much more promising outlook as the pandemic recedes in the...
Vietnam is by some accounts likely to take over China as the “world’s manufacturing hub” amid lasting economic disruptions mainly caused by the Covid-19 pandemic and China’s unpredictable policies which have prompted international companies to reconsider their exposure to the country.
Supply chain issues have added to the woes as China continues to battle virus flare-ups in its major production hubs such as Guangdong province and Shanghai with the result that the delivery of factory orders has become unreliable.
In turn, Vietnam’s first quarter economic figures appear to show a much more promising outlook as the pandemic recedes in the country. In addition, cheaper land purchasing rights, labour wages and operational expenses for factories and warehouses have caught the attention of large electronics manufacturers in the past, such as Samsung, Foxconn and even China’s smartphone giant Xiaomi, alongside IBM, Microsoft, Nestlé, Procter & Gamble, Pepsico, Unilever, Nike and Honda, among others.
Faster growth than China
According to Vietnam’s General Statistics Office, the country’s economy expanded by around five per cent in the first quarter of 2022 over the same period last year, surpassing China which grew 4.8 per cent. Vietnam’s foreign trade rose to $176.35 billion in the period, a year-on-year increase of 14.4 per cent. In comparison, China’s foreign trade in the first quarter rose 10.7 per cent in yuan terms.
Moreover, foreign investors and other foreign-owned businesses keep pouring more money into the country of almost 100 million inhabitants with a large, decently educated and diligent workforce.
Historically, China began its economic reforms and opening-up in 1978. Vietnam followed China’s footsteps and started its own market reform known as “doi moi” in 1986. For the past decades, economic growth on both countries has been remarkable.
Geopolitical and macroeconomic challenges
But the onset of a trade war between the US and China in 2018 has accelerated a fourth wave of industrial chain transfers, with countries such as Vietnam and Mexico emerging as the biggest winners of the trade disputes.
Vietnam’s trade with the US has grown significantly since 2018. The latest data showed Vietnam’s trade surplus with the US rose to $81 billion in 2021 from $63 billion in 2020, hitting an all-time high.
Analysts expect that in the foreseeable future, Vietnam will continue to remain attractive for foreign investment and – most of all – a destination for supply chain diversification amid geopolitical macroeconomic challenges and insecurities.
