Affected by the epidemic, my country's resumption of work is proceeding slowly and orderly. However, because China is an important part of the global supply chain, the impact of the early shutdown has been highlighted around the world. For example, Hyundai Motor has launched emergency measures to urgently expand its procurement scale in China and Southeast Asia; Xiaomi said it has transferred some orders to Vietnam and Thailand for production; Electrolux has organized a team to find other suppliers.
It can be seen that a large amount of data and facts are pushing Vietnam to the center of the stage.
Since entering the 21st century, Vietnam's annual GDP growth rate has basically remained at 6% to 7% in the past 20 years, occasionally falling to around 5%. Since 2015, this number has remained stable at more than 6.5%, which can be said to be the fastest growing economy in Southeast Asia. According to data from the U.S. International Trade Commission, in the first four months of 2019, U.S. imports from Vietnam soared by nearly 40% year-on-year, which was the largest increase among the top 40 U.S. import source countries.
Industries such as clothing, shoes and hats, and furniture that have factories in China have been in Vietnam for a long time, and high-tech industries are also gradually moving to Vietnam. For example, Intel set up its world's largest packaging and testing plant in Ho Chi Minh City many years ago; South Korean electronics giant Samsung closed its last mobile phone factory in China in October 2019 and moved it to Vietnam. Samsung exports 10% of its mobile phones to the global market. Most of them are already produced in Vietnam.
Can Vietnam develop into a new world factory?
1 First impressions of Vietnam
Vietnam’s land is very narrow and long, with a distance of 1,650 kilometers from north to south, and very narrow from east to west, with the narrowest point only 50 kilometers. This long and narrow land shape is related to the geographical structure of Indochina. There is a section of the Changshan Mountains (also called the Annan Mountains) that is more than 1,000 kilometers long on the Indochina Peninsula. It is almost the remnant of the Hengduan Mountains in southwest China. It runs diagonally across the Indochina Peninsula from northwest to southeast, separating the eastern coastal plain area from the western mountainous area. It forms the natural dividing line between Vietnam and Laos.
The Truong Son Mountains reach the coast from Da Nang, an important town in central Vietnam, and continue to extend southward along the coast. In this way, it divided Vietnam into two regions: the South China Sea system and the Mekong River (the section of the river in China is called Lancang River) water system. is a densely populated area formed around the deltas of two major river systems - Hanoi and its surrounding areas in the Red River Delta, and Ho Chi Minh City (formerly known as Saigon) and its surrounding areas in the Mekong Delta. They are the two most prosperous and prosperous economic circles in Vietnam. Most of Vietnam’s population of more than 90 million people. The central area between the two major regions of has inconvenient transportation, relatively sparse population, and more sturdy folk customs.
The picture shows that on December 15, 2016, the Mekong River joint patrol and law enforcement boat formation of China, Laos, Myanmar, and Thailand sailed past the Jinghong Port Terminal in Yunnan. Source: Qian Cheng | Xinhua News Agency
To investigate the manufacturing industry, we must go deep into the two major economic circles of the north and the south. The first stop for the inspection was Hanoi.
The initial impression of Hanoi is that it looks very much like mainland China in the 1990s. Take a car from the airport to the city. The straight and wide highway gives people a strong feeling of a modern country. The further you go, the messy state of the old city emerges: old colonial-style houses, various temporary and illegal buildings, and some newly built modern high-rise buildings, all of which lack order. The ground is mixed together. Surrounding the modern building is a newly planned and orderly wide road. A little further to the side, there are crowded and narrow streets with many years of history. A constant stream of motorcycles whizzes by on various streets.
For a society, the real vitality and vitality come from its self-generated order of activities, rather than neat top-down planning. The spontaneous order of a city relies precisely on various local knowledge that is difficult for outsiders to understand. The so-called chaos is often just an outsider's perspective. It is just a protective layer for locals. At the same time, it means the limit of the government's ability to suppress society and the foundation of society's ability to self-organize. The chaos in Hanoi did not make me feel uncomfortable. On the contrary, it made me feel all kinds of smoke and smoke, which gave me a good feeling.
At night, the vitality of Hanoi is further revealed. We live next to Hoan Kiem Lake, a famous scenic spot in the city center, which is roughly equivalent to the location near Wangfujing in Beijing. If you take a stroll by Hoan Kiem Lake at night, you will see a large number of vendors on the roadside selling ice water, coconuts and various freshly squeezed juices. There are police standing next to the vendors, and both parties are in peace.
There are rows of small plastic benches placed around the stall. These small benches have been integrated into the daily life of Vietnamese people. They are everywhere on the roadside, in front of stores, and in front of ordinary people's homes. People sit in rows on it, eating fruits, drinking coconut juice, smoking, or chatting.
The picture shows a corner of Hanoi, the capital of Vietnam, in 2015. Photo source: Yan Jianhua | But after staying in Vietnam for a while, I realized that the powerful people in Vietnam also sit on small benches at roadside stalls to chat and eat, just because they like it. The consumption of different classes of people in Vietnam is mixed together, and there are no clearly separated circles. Who are those very luxurious and modern shopping malls for? The answer is that they are basically for foreigners.
Hoan Kiem Lake is full of old buildings with hundreds of years of age left over from ancient times, with plaques and couplets written in Chinese hanging on them, and even a door is decorated with several couplets. Although the literary talent is mostly so-so, seeing these things still makes people feel like they have been abroad. There is a scenic spot next to Hoan Kiem Lake called Ngoc Son Temple, which was built in the late Le Dynasty in the 18th century. It enshrines many statues of gods such as Emperor Guan, Lu Zu, and Emperor Wen Chang. In the small stores you can see everywhere, most of them will have a land master.
Not far away from Yushan Temple, I heard someone singing "The Moon Represents My Heart". The singer's Chinese pronunciation was a bit sluggish, but when she got closer, she turned out to be a white girl. The streets of Hanoi, Chinese songs, and white girls are all mixed together, deeply reflecting Vietnam's diverse openness to the world. If a country wants to develop, it must have such a pluralistic and open nature.
Overall, the initial impression of Vietnam is not bad. The noisy atmosphere makes people feel familiar. The city looks chaotic, but it is full of vitality and human touch. Can such a comfortable place really be able to replace China economically? So you have to check out its industrial park.
2 Shenzhen Industrial Park
The first stop is Vietnam-Singapore Industrial Park (hereinafter referred to as VSIP). This industrial park was built in Bac Ninh Province, not far from Hanoi, and was established in cooperation with the Vietnamese government.
The provinces in Vietnam are very small. After all, the country covers an area of less than 330,000 square kilometers and is divided into 58 provinces. Not far after leaving Hanoi, we started crossing provinces. On the way to the industrial park, we passed through the Red River Delta, with a network of rivers and fertile land dotted with endless rice fields. However, compared with the visible richness of the Red River Delta, the roads here seem shabby, narrow and of average quality, with motorcycles roaring between various cars. The distance from Hanoi to the industrial park is about 25 kilometers, and it took a full hour to complete.
Actually, this is the norm in Vietnam’s provincial roads. Vietnam still has a long way to go in terms of transportation infrastructure construction except for the two central cities in the north and south. For example, if logistics wants to transport goods from Hanoi to Ho Chi Minh City, if they choose Highway 1, the distance of 1,700 kilometers will have to be walked for 48 hours without sleep even if two drivers work shifts. Moreover, many places on the road are single lanes, which may cause traffic jams in the event of an accident. But apart from aviation, the fastest way to connect the two cities is by car. It takes 4 days to travel by train, and by sea, including land connections on both sides, it takes about 7 days.
After driving on the provincial road for an hour, we entered VSIP, and the scene in front of us immediately became very different.The roads in the park are very straight, and the buildings are very regular and modern. It is very similar in temperament to the Singapore Industrial Park in Suzhou.
In 1996, Singapore established the first VSIP in Binh Duong Province near Ho Chi Minh City, and the second in Bac Ninh in 2007. By 2019, Singapore had built 8 VSIPs in Vietnam. The VSIP in Bac Ninh covers an area of approximately 7 square kilometers. So far, 120 companies have settled in the park, with a total investment of US$2.5 billion (equivalent to approximately RMB 17.58 billion) and 30,000 workers in the park.
What attracts Singapore to build an industrial park in Vietnam? The most important reason is that Vietnam has formulated a series of investment policies for industrial parks.
First of all, enterprises in industrial parks can enjoy very preferential tax policies, commonly known as "two exemptions and four half reductions". Vietnam's corporate income tax rate is 20%, and companies that set up factories in industrial zones approved by the central government are exempt from income tax for the first two years, and only have to pay half of the tax for the next four years. Import duties on raw materials imported for the production of export products, value-added tax on export goods, and profit repatriation tax are all exempted at all stages. In order to balance regional development, Vietnam has also established some special economic zones, where the policies are more favorable. Corporate income tax is completely exempted for the first four years and halved in the next nine years. If an enterprise invests in a long-term project in an economically backward area, the land use period can be extended beyond the usual 50-year lease period to 70 years; if approved by the competent authority, it can even be extended for a longer period.
The picture shows a corner of the Vietnam-Singapore Industrial Park in Bac Ninh Province.
Secondly, the investment preferential policies given by various industrial parks in Vietnam are basically the same and are formulated by the central government of Vietnam. Since 2005, Vietnam has published the Provincial Competitiveness Index (hereinafter referred to as PCI) report for each province in the country every year. This report, jointly produced by the Vietnam Chamber of Commerce and Industry (VCCI) and the United States Agency for International Development (USAID), comprehensively reflects the economic governance level of Vietnam's provinces, the convenience and friendliness of the business environment, and the effect of administrative system reforms. The PCI report has become an important reference for foreign investment in Vietnam, with provinces competing on this index.
VSIP gives people a good impression. The dilapidation outside the park and the cleanliness inside the park are in sharp contrast. This kind of comparison is not unfamiliar at all to those who have personally experienced China's rapid development in recent years. This is an extremely familiar development path.
A few days later, we visited Sim Viet Industrial Park, which is located in Haiphong City, east of Hanoi - the relationship between Hanoi and Haiphong is similar to the relationship between Beijing and Tianjin. Shenyue Industrial Park was invested and constructed by Shenzhen Investment Holding Co., Ltd. (hereinafter referred to as "Shenzhen Investment Holdings"). The project was established as early as 2008, but due to various reasons, the construction did not really start until the second half of 2016. .
Shenzhen Investment Holdings was cautious when it first started building the industrial park. Unexpectedly, trade friction broke out between China and the United States as soon as part of it was completed. Suddenly, many companies began to look for opportunities to relocate to Vietnam. The Shenyue Industrial Park suddenly became very popular and received a large number of inspection groups non-stop every day. The investment from Shenzhen Investment Holdings was also recovered an order of magnitude faster than expected. Shenzhen Investment Holdings was greatly encouraged by this and started its next investment plan, preparing to further expand the area of the industrial park to accommodate a larger-scale manufacturing transfer.
The picture shows the entrance of Shenyue Industrial Park, Shenyue Avenue. Source: Jiemian News
3 Advantages and Disadvantages
A series of data and policies learned from these two industrial parks intuitively show Vietnam’s determination to develop its economy. However, the communication with them also verified another previous assumption, that is, if a large number of manufacturing companies quickly pour into Vietnam, it will push up the price of Vietnam's land and labor, and its advantage in this regard will be undermined. to weaken.
According to data released by CBRE, an established real estate leasing consulting company in the United States, in May 2019, in terms of rental prices for completed factories, the average monthly rent in Ho Chi Minh City, the largest city in southern Vietnam, is US$4.1 per square meter ( Equivalent to approximately RMB 28.7), the highest monthly rent is US$8 per square meter (equivalent to approximately RMB 56); the average monthly rent in Vietnam’s northern economic circle (concentrated in Hanoi, Bac Ninh, Haiphong, etc.) is 3.5 to 4 per square meter US dollars (equivalent to approximately 24 to 28 yuan in RMB), and the maximum monthly rent is US$5.5 to 6 per square meter (equivalent to approximately 38 to 42 yuan in RMB). The monthly rent of factories built in Suzhou, China is about US$4.2 per square meter (equivalent to about 29.5 yuan), Dongguan is about US$3.6 per square meter (equivalent to about 25 yuan), and Chengdu is about 2.5 per square meter. US dollars (equivalent to approximately RMB 17.5). Compared with many places in China, Vietnam has no advantages.
However, Vietnam’s labor price has obvious advantages. In 2018, the per capita monthly income of Chinese workers was US$807 (equivalent to approximately RMB 5,658). In Vietnam, it was not until the first half of 2019 that the average monthly salary of the labor force reached US$288 (equivalent to approximately RMB 2,021), while the average monthly salary of ordinary workers was only US$206 (equivalent to approximately RMB 1,444). But Vietnam has a policy that the Congress legislates to raise the minimum wage every year. The increase rate in previous years was 12%-13% per year, which put considerable pressure on enterprises, so it has declined in recent years. The increase rate in 2019 was 5.3%. However, as more and more companies have moved here in recent years, the supply of labor exceeds demand, and skilled workers and managers are in even greater demand. The salaries offered by companies are usually much higher than the minimum wage, and there will be corresponding increases every year.
The Vietnamese government is also wary of this, worried that the influx of companies too quickly will raise factor prices too quickly, causing Vietnam to quickly lose its competitiveness. Once these companies move quickly, Vietnam's economy will be in big trouble. Therefore, the government began to exercise control and was more cautious in approving investments than in the past.
The picture shows Vietnamese workers working in a factory. Source: Xinhua International
Not only is factory rent more expensive in Vietnam than in China, but water and electricity costs are also higher than in China. The price of water and electricity in China is about 2/3 of that in Vietnam. Generally speaking, Vietnam mainly has advantages over China in terms of labor and tax policies, but is basically at a disadvantage in other aspects. So, from the perspective of comparative advantage alone, only industrial links that have relatively high labor costs and tax costs (including tariff costs to the United States) and are not so dependent on the supply chain will tend to migrate to Vietnam. In fact, China's cost comparison is not only like this with Vietnam, but also with other Southeast Asian countries in most cases.
From this point of view, Vietnam’s path to replacing China’s status as the world’s factory does not seem to be so smooth.
4 Structural Dilemma
Vietnam has an inner impulse to follow the path of Japan and South Korea. It needs to develop heavy and chemical industries, which needs to be promoted through a series of economic policies led by the state, and needs to be implemented by supporting state-owned enterprises or chaebols.
However, if Vietnam wants to form an alliance with the United States, it must accept the constraints of the series of free trade agreements on Vietnam's economic policies, accept various restrictions on state-owned enterprises, and accept restrictions on policy support that is not in line with the principles of market economy. At that time, South Korea could use various non-market means to support the big chaebols, but it did not affect its alliance with the United States. The reason was that it was the Cold War era, and the weight of political factors overwhelmed economic factors. However, in the 21st century, the economic path a country takes (whether it is market-oriented or policy support-oriented) is a political label used by the United States to identify its allies. Therefore, Vietnam has little chance of copying South Korea’s path, and is more likely to follow a market-oriented path.
Over the years, Vietnam has carried out large-scale privatization reforms of state-owned enterprises. Currently, more than 100 state-owned enterprises are still planning to sell off. Vietnam is committed to establishing a transparent legal framework that is comparable to the international advanced level and allowing foreign investors to compete more fairly and justly with Vietnamese enterprises. This kind of competition will not be monopolized by state-owned enterprises, but will be market competition in a free economy.
The most famous private enterprise group in Vietnam is the Vingroup of the richest man Pham Nhat Vong. In the 1990s, Fan Riwang studied in Russia, and later worked in the food industry in Ukraine, where he made his first pot of gold. In 2001, he returned to Vietnam for development and entered the real estate industry. Now he has developed landmark buildings in various cities in Vietnam. In recent years, Vingroup has expanded into various fields, such as education, hospitals, supermarkets, convenience stores, electrical appliance stores, mobile phones, home appliances, automobiles, aviation schools, organic agriculture, pharmaceuticals... and has almost penetrated into the lives of Vietnamese people. various related fields. However, there are so many industries to invest in, many of which are not related to each other, which is inconsistent with the investment rules. On the contrary, this is very similar to the investment logic of the large chaebols supported by the Korean government. During the survey, we also noticed several other smaller private enterprise groups that also have unusual cross-sector investments.
How far these support policies can go is hard to say. If it goes too far, like South Korea, Vietnam is likely to be kicked out of those free trade agreements, and its efforts to use the West to resolve its geopolitical anxieties will fail. Furthermore, even if they can go that far, it is difficult to say whether the chaebol can help Vietnam establish a complete industrial system. After all, when South Korea started, there was no large-scale supply chain network like China nearby, and it would not be affected by its external effects. If Vietnam's support policies cannot go that far, its heavy and chemical industries will be difficult to develop in the evolution of the free market, and Vietnam will not be able to have its own complete industrial system.
The two situations are in a dilemma and cannot have both. This is the structural dilemma faced by Vietnam.
In this dilemma, the most likely path for Vietnam is to continue to deepen free trade relations with the United States, the European Union, and Japan. After all, this is the basis on which it secures external support. However, this also means that there are limits to the Vietnamese government’s support. There is a high probability that Vietnam can only adapt to its comparative advantages in the world market and embed itself in an appropriate position. This is a very paradoxical situation: precisely because it faces a similar situation to Japan and South Korea, it is likely to take a path closer to Australia and Canada.
In addition, Vietnam's current comparative advantage also has a dual character. Vietnam is more likely to be embedded in the US system in terms of trade and in the Chinese system in terms of production. As a result, Vietnam's manufacturing development will become a spillover from China's supply chain network and an important intermediary for China's supply chain network to reach the world market.
The development of economic integration between China and Vietnam in recent years has also shown such a trend.
Figure 3-3 is the China-Vietnam Economic Integration Index from 1996 to 2015. We can see from it that although the China-Vietnam Economic Integration Index occasionally fell briefly due to political and economic crises, the general trend is rising, especially in 2011. After that, the economic integration index rose significantly. Moreover, a series of related studies show that not only the degree of economic integration between China and Vietnam is deepening, but also the degree of integration between China and the entire Southeast Asian countries has a trend of deepening.
5 Supply Chain Power
Speaking of China’s ultra-large-scale supply chain network, the division of labor in this network is becoming more and more detailed. The specialization of a single enterprise can reach an incredible level; countless enterprises in the network support each other. relationships, and supporting relationships can be continuously and dynamically reorganized according to order demand to produce a variety of products; China's huge group of engineers and skilled workers provide huge human resources for the supply chain network; China's highly competitive The environment and the Chinese people's strong desire to get rich have made this supply chain unparalleled in efficiency.
This operational efficiency of the supply chain gives China a unique competitive advantage, even if it is producing a low-tech product, unless the product has low demand on the supply chain and labor costs account for a high proportion of the total cost. , otherwise it will be difficult for other countries to compete with China. Because China has the ability to control the comprehensive production cost of products at a very low level. This cost control ability relies on a huge supply chain system, rather than any cheap production factors.
Moreover, China's huge supply chain not only relies on the pull of the world market, but also relies on the pull of China's huge domestic consumer market. In recent years, the pulling effect of the domestic consumer market has become more and more obvious.
You can briefly take a look at the changes in China's foreign trade dependence since the reform and opening up. Figure 3-1 shows the change process from 1978 to 2014.
In 1978, China's foreign trade dependence was only 9.73%; as China gradually integrated into the world, its foreign trade dependence developed to 39.36% in 2000; after joining the WTO in 2001, China's foreign trade dependence increased rapidly, reaching 39.36% in 2006. reached a record high of 64.77%. At this stage, the world market has a great pulling effect on China's economy and supply chain. After that, China's domestic demand market gradually developed and its dependence on foreign trade began to decline. It had dropped to about 34% in 2018, while China's economic development has not slowed down proportionally. This means that domestic demand is increasingly driving China’s economic development.
According to data from the National Bureau of Statistics, China's total retail sales of consumer goods increased by 9.0% year-on-year to 38.1 trillion yuan in 2018. During the same period, the total retail sales of consumer goods in the United States was US$6.04 trillion, a year-on-year increase of 5%. Calculated based on that year's exchange rate, the size of China's consumer market is equivalent to 95.36% of that of the United States. By 2019, China has surpassed the United States to become the world's largest single country consumer market.
These data mean that China's supply chain network will not shrink due to the relocation of part of the production capacity, because the growth of domestic demand can make up for it.
Even if Vietnam develops its own supply chain network in the future development process, its own size is too small, and the scale of the supply chain it can support is completely incomparable with China. The depth of division of labor and flexibility of cooperation within Vietnam's supply chain, that is, the operating efficiency of the supply chain, are far inferior to that of China.
This also means that if manufacturing companies that move to Vietnam have higher demand for the supply chain, they will still purchase from the Chinese supply chain, especially various standard parts upstream of the production process. More efficient than sourcing from Vietnam. In this way, the manufacturing capabilities transferred to Vietnam are not transferred from China, but more of a chimeric relationship with China's supply chain.
Of course, there is a premise here, that is, the cost of customs clearance between China and Vietnam cannot be too high. With the advancement of the free trade partnership between China and ASEAN, the customs clearance costs of China and Vietnam are constantly declining. A few years ago, even for relatively well-qualified shippers and carriers, it would take more than 4 hours to clear customs for a container truck at Guangxi Pingxiang Friendship Pass, the largest land port between China and Vietnam; Now, if everything goes well, it only takes more than an hour. The Regional Comprehensive Economic Partnership (RCEP) is expected to be officially signed in the near future. If it can be successfully signed, a greater free trade partnership will be formed between ASEAN and China, Japan, South Korea, Australia, New Zealand and other countries. These will continue to reduce customs clearance costs.
The picture shows the Youyiguan Port in Pingxiang, Guangxi, taken by a drone on April 17, 2019. Picture source: Cao Yiming | Because the current global economy is already a transnational division of labor at the process level, producers will look for factors with comparative advantages in various countries and allocate production links to appropriate regions.As for Vietnam's comparative advantage over China, on the one hand, it is the advantage in the price of production factors, especially the price of labor, and on the other hand, it is the advantage in tariffs when trading with other countries. Taking these into account, we can discover some characteristics of manufacturing companies that move to Vietnam.
These companies do not move complete production lines, but specific processes in the production process to Vietnam, usually the final assembly process. Because this process only needs to assemble the parts together, and does not require complicated processing of the parts, the demand for the supply chain is relatively low, and the proportion of labor costs is relatively high. Vietnam is relatively good in this regard. Advantageous. However, Vietnam's ability in the front-end process (relatively complex processing of parts and components) is not yet up to par, so it will be difficult to transfer the corresponding manufacturing industry to Vietnam.
In this logic of production capacity transfer, it is no longer appropriate to use traditional division methods to classify different industries into high and low technology. For the same product, the technical content of different production processes or links is very different, and the added value of different processes is also very different. After the production process entered the stage of transnational division of labor, the traditional concept of production has been broken, and the traditional analysis framework has also encountered the problem of applicability boundary.
The picture shows the night view of Ho Chi Minh City. Source: Xinhua News Agency
Even for one process, the intermediate products required for the process itself have a complex transnational division of labor in the production process. Mr. Ren Zezhong, the owner of a furniture factory who started his business in Vietnam in 2000, provided a very good case.
Mr. Ren Zezhong said that the furniture industry supply chain includes more than a dozen supporting industries such as hardware, paint, panels, leather, and cartons. Vietnam has developed local suppliers needed for the furniture industry, but the raw materials required for production by these suppliers still have to be imported from China. For example, when producing a sofa in Vietnam, 90% of the leather materials come from Jiangsu and 80% of the sponge raw materials come from China; more than 90% of the plywood used in the production of furniture comes from Linyi, Shandong; in the hardware industry supporting the furniture industry, about 60% of the iron must be imported from China and then processed into hardware locally in Vietnam.
Even the supporting industry of cartons used to package furniture cannot do without China. Although the cartons themselves are purchased directly from Vietnam, the raw material for making the cartons, cardboard, still has to be imported from China. To produce cartons, you must first have raw pulp made of original wood, and then use recycled waste paper to make secondary pulp. The secondary pulp is mixed with the original pulp to make paper skin. Only the first-level factory can produce paper, then the second-level factory will process the paper into cardboard, and finally the third-level factory will process the cardboard into cartons. Due to resource and scale constraints, Vietnam currently only has three-level factories, so it can only import cardboard from China and reprocess it into cartons.
In the furniture industry, which is generally considered to have very low technical content, Vietnam's industry has such a complex and integrated relationship with the supply chain network in China and even the world, not to mention the electronics industry, which has a much higher technical content. We also obtained a large number of relevant cases during our inspection in Vietnam, which showed that the transfer of manufacturing industry from China to Vietnam was not a transfer away from China, but a spillover from China's supply chain network.
This spillover process is partly due to market rules. Either the company is looking for a place with higher comparative advantages in specific production links. For example, Vietnam has a comparative advantage in production links that do not require high supply chain requirements and have a relatively high proportion of labor costs. Or the company has certain advantages when laying out the global market. Consider, for example, the home appliance companies we inspected, such as Haier and TCL.
There are also some reasons for international politics. Several companies in the interviews mentioned that because their products are mainly exported to the US market, relocating to Vietnam has become a helpless option. However, after the migration, they are still inextricably linked to China's supply chain network.
Finally, let’s make a hypothesis. If the manufacturing industry in Dongguan is transferred to Vietnam in a short period of time, what changes will happen to Vietnam?
Dongguan’s output value is approximately equivalent to half of Vietnam’s entire country, and Dongguan’s industry accounts for 10% of the economic structure. The proportion is much larger than that of Vietnam. This means that Vietnam's manufacturing industry will suddenly expand by more than half, land prices will skyrocket, there will be a shortage of qualified workers, labor costs will skyrocket, and a large amount of hot money will flow in, which will lead to a serious asset bubble in Vietnam.
If the price of factors rises too fast, Vietnam will lose its original comparative advantage, hot money will quickly escape, and the wealth of Vietnamese people may be robbed in the asset bubble, thus triggering a serious economic crisis, social crisis, and even political crisis. This is an extremely terrible economic fever and sequelae for any country. And this is just the transfer of Dongguan's manufacturing industry to Vietnam.
Felix, editor-in-chief of "Vietnam Economic Annual Report" and dean of the Institute of Economics and Policy at the University of Economics under Hanoi National University, often comes to China and is familiar with both China and Vietnam. He believes that Vietnam's best development situation is , a level between Taiwan, China and Malaysia, and it is completely impossible to replace China.
In summary, this positioning is indeed not modest.
