Vietnam benefits from US-China trade spat 

Companies in China fear tariffs on exports to the United States amid the growing trade war between the two countries escalates and several employers are moving to Vietnam to avoid further problems. 

China’s increasingly business-friendly neighbour has long taken advantage of its cheaper labour and relaxed business environment. Vietnam has been attracting investment before the US sanctions were introduced last September.

A stream of manufacturers has moved operations to Vietnam, including Foxconn, Samsung and LG.

“Vietnam has already been gaining as wages have been rising in China,” said Mary Lovely of the Peterson Institute for International Economics think tank.

From January to April this year Chinese investment into Vietnam reached about 65 per cent of the 2018 total. 

Meanwhile, Vietnam’s exports to the US increased by 28.8 per cent year on year in the first quarter of this year, making the US the largest destination for Vietnam’s exports.

Vietnam’s manufacturing sector has developed rapidly in the last 10 years with multinationals like Ikea investing heavily in factories in the supposedly communist state. 

In recent years, Vietnam has been active in signing bilateral trade agreements with other countries. 

Hanoi’s Asean membership gives it access to several free-trade agreements in addition to the looming Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Vietnam-EU deal.

Quality standards, manufacturing and employee rights guaranteed in its agreements are intended to allow Vietnam to build on its reputation as a manufacturing hub and expand exports.

“Many companies were investing in production outside China, particularly in Southeast Asia, before the current trade conflict”, reported Baker and McKenzie, a legal from in Hong Kong. “The recent trade friction has simply accelerated this evolution.”

But Vietnam’s labour costs are rising with limited numbers of recruits available, compared with China’s giant workforce.

Vietnamese employers also face rising land and factory costs.

Property specialists JLL Vietnam said rental prices rose by 11 per cent in the second half of last year in southern Vietnam.

But US pressure on China shows no signs of reducing. 

Trump recently tweeted: “Many Tariffed companies will be leaving China for Vietnam and other such countries in Asia. That’s why China wants to make a deal so badly!”

The tycoon turned populist said he told Chinese President Xi Jinping before the most recent rounds of talks that any deal could not be “50-50” between the countries and had to be more in favour of Washington because of past trade practices of China.

 

Vietnam has always been renowned for its work ethic. Picture credit: Wikimedia