Since the second half of the twentieth century, the international industrial transfer, which is the result of globalization and industrial division of labor, has taken the route from Japan to the four Asian tigers to China, like a window of fortune that always opens for certain countries at certain times. And when it comes to the next industrial transfer destination, there’s one that can’t be bypassed in Southeast Asia: Vietnam.
Vietnam has long been remembered by many as a loser, yet over the years, it has been stiflingly wealthy. This Southeast Asian country adjacent to China has maintained economic growth of more than 6 percent in recent years and has become a hot destination for international industrial transfers.
Vietnam becomes “meat and potatoes” for international producers as trade turnover reaches $517 billion
Vietnam is a typical export-oriented economy, with total trade reaching $517 billion in 2019, almost twice its GDP. Among them, Vietnam’s footwear, clothing, knitwear and other products have a relatively strong export growth, these are the most commonly produced products before the Chinese factories. However, we should also be aware that Vietnam is too small compared to China, the “Big Mac”. Even in these low- and mid-range industries, Vietnam’s scale is not as large as China’s, but it is developing rapidly, with China’s growth and decline in the trend.
In terms of figures, Vietnam’s footwear exports reached $18.2 billion in 2019, second only to China; Vietnam’s garment exports have exceeded $30 billion, surpassing Bangladesh as the world’s second largest exporter of ready-made garments. Especially in the environment of fierce competition between China and the US, Vietnam has also taken over most of the orders transferred from China by the US. By the second quarter of 2019, Vietnam had absorbed $14 billion of the $31 billion reduction in US imports from China, eating almost half of it.
It should be noted that the worsening external environment has only accelerated some of the industrial shift to Vietnam, which actually took place much earlier. In 2009, for example, Nike had finished overtaking China in terms of production capacity at its Vietnamese foundry. Today, 50% of Nike and Adidas’ production comes from Vietnam, while only 20% comes from China. In recent years, Vietnam has become the meat and potatoes of international manufacturers, with foreign investors’ investment in the country totaling $38 billion in 2019 alone, a 10-year high.
Not only the low- and mid-range industries, now Vietnam also has to undertake some high-end manufacturing. In the past two years, there are a few companies that announced to invest in Vietnam to build factories, in addition to Uniqlo, Hasbro, Kiansheng Group and other companies involved in the clothing and footwear industry, but also including Intel, Samsung, Sharp, China’s Geer Acoustics, Li Xun Precision and other technology companies involved in chips, mobile phones and screens all announced to invest in Vietnam to build factories.
Samsung, for example, has moved almost all of its mobile phone production capacity from China to Vietnam, and in 2018, 50 percent of the phones Samsung sold were produced in Vietnam, while one-third of the electronics were produced in Vietnam; in 2019, Geer Acoustics invested $260 million in Vietnam’s industrial zone; Vietnam is now trying to become a new manufacturing center for the global electronics industry. Vietnam is arguably following the path that China once took.
In the face of industrial relocation, China may have three major strategies to deal with it
Of course, there is only one Vietnam is certainly not the rival of China’s manufacturing. But we also need to know that in recent years, the United States, Japan, India and Australia and other countries to build an exclusive international industrial alliance called “economic prosperity network”; and in addition to Vietnam, there are other countries in Southeast Asia, India and other potential industrial transfer destinations, therefore, we should also plan ahead and do a good job of coping strategies. According to Golden Ten Data.
First and foremost, industrial upgrading is the most important. When international industries were moving to China, Japan and the Four Asian Tigers all upgraded their industries to maintain the competitiveness of their manufacturing industries, so industrial upgrading is also the only way for China to go. In fact, in recent years, China has been in action, such as the implementation of the “Made in China 2025” strategy, increasing investment in 5G, artificial intelligence and other “new infrastructure”.
Secondly, we should actively expand opening up to the outside world. China is the world’s largest single-country market with a population of 1.4 billion, which is a “big cake” that most international producers cannot ignore. Therefore, by expanding the opening to the outside world, international manufacturers will not easily move their industries out of China, and at the same time, even increase their investment in China. In fact, China is becoming a “safe haven” for transnational investment, attracting foreign investment of more than 100 billion U.S. dollars in the first nine months of this year, to achieve a “positive”.
In addition, it is strengthening economic and trade cooperation with other countries. To a certain extent, China’s victory in the fight against the epidemic has strengthened its position in the global supply chain. At a time when global trade is shrinking, China “stands alone”, in the first nine months of this year, China’s foreign trade increased by 0.7%; now that China’s economy has returned to growth, strengthening economic and trade cooperation with various countries not only allows them to catch a ride on China’s economic “hitchhiker”. It will also further increase China’s manufacturing market share.
So, this down, will promote China from “manufacturing country” to “manufacturing power” transformation, not only can consolidate China’s “global manufacturing center” status, in the future when facing the worst of the situation can also be more confident.
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