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In recent years, Vietnam has become a popular destination for overseas companies, attracting many enterprises to set up factories. However, with the booming Chinese economy and rising labor costs, some overseas companies have chosen to relocate factories to Vietnam. There are several striking factors behind this phenomenon.
First of all, Vietnam has a demographic dividend, with up to 56% of its nearly 100 million people in the labor force. Their hourly wages average just $1.50, well below the $3 an hour paid by Chinese workers. This makes the choice to build a factory in Southeast Asia a labor cost saving measure.
Second, Vietnam offers generous tax incentives to attract companies that had previously set up factories in China to relocate to Vietnam. These policies, including tax breaks, offer huge potential benefits to businesses.
Finally, the advantages of Vietnam's geographical location cannot be ignored. It borders Guangxi, Yunnan and other places in China, which provides convenient conditions for port construction and is conducive to the development of logistics and international trade.
The combination of these factors has enabled Vietnam to attract many companies in a short period of time, including Samsung, Canon, Adidas, Nike, Foxconn and, more recently, BYD, etc., to sign contracts to build factories in Vietnam.
However, despite the short-term improvement of Vietnam's economy thanks to labor-intensive industries, Vietnam, which lacks technical support, has encountered a bottleneck by relying only on cheap labor. Vietnam's financial report shows that exports in the first quarter of 2023 fell by 11.9% year-on-year, and in just one month, Vietnam's exports fell by 17%. More than 40,000 enterprises across the country have had to stop production, indicating that Vietnam's economy has begun a sustained decline and faces the threat of financial crisis.
To achieve long-term growth, companies must have technical support. However, Vietnam's relatively low level of technology is in stark contrast to China's critical development period of industrial transformation. After experiencing challenges such as the global economic crisis, trade disputes, and technological blockades of Western countries, China has understood that industrial transformation and technological development are equally important to achieve long-term prosperity.
Over the years, in order to break the monopoly of Western countries, China has made qualitative leaps in various fields. In the aerospace sector, China's domestically produced large aircraft have won 1,200 international orders and will compete with Boeing of the United States. In terms of industry, China has regained its international voice with 0.015 mm hand-torn steel technology.
While manufacturing in places like Southeast Asia is growing, many once thought Vietnam might replace China as the second "factory of the world," but the reality has changed. Vietnam's exports of low-level industries were blocked, foreign capital began to withdraw, and Vietnam's economic dividend period gradually disappeared. In contrast, China has successfully transformed from labor-intensive industries to high-tech industries. China has a complete industrial chain and huge market potential, and countries around the world rely on products made in China, so the possibility of Vietnam replacing China is minimal.
At present, Vietnam's economic decline is mainly affected by the sluggish consumption in the European and American markets, and the overall export is facing a downward trend. Some companies have taken measures such as layoffs to save money, and some companies have even withdrawn from Vietnam. This suggests that the pattern of relying on foreign trade orders to boost a country's economy is unlikely to be sustainable in the long term.
In contrast, Made in China has gained a firm foothold in the world and has been recognized by many countries. Foreign companies such as Tesla and BMW are optimistic about China's development prospects and have established factories in China. This shows China's important position as a global manufacturing industry and the continuous emergence of Chinese manufacturing on the world stage.
To sum up, although Vietnam was once pinned on high hopes, with the withdrawal of foreign investment and the restriction of low technology level, Vietnam's economic dividend period has gradually drifted away. In contrast, China has not only made great progress in technology and industry, but also gained a stable foothold in the international market. Therefore, the status of Made in China in the global manufacturing industry remains unshakable.
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