EuroCham: Vietnam attracts more firms leaving China; Blinken says Beijing ‘no longer comfortable’ with Taiwan status quo & Why China's Covid deaths likely in the millions -- China Boss News 1.23.23
Newsletter
The Big Story in China Business
Vietnam attracts more companies decentralizing away from China, surveys
“More foreign firms have begun or are considering relocating part of their operation from China to neighboring countries such as Vietnam and India, according to two recent surveys,” South China Morning Post reported. Results of both polls are the “latest indication of how Beijing’s hardline zero-Covid policy has damaged the country’s reputation in the global supply chain,” news staff said.
SCMP:
The share of European companies that have relocated some of their operations from China to Vietnam rose to 41 per cent in the last quarter of 2022, up from 13 per cent in the third quarter, the European Chamber of Commerce in Vietnam said.
The chamber’s survey, which was released on Thursday, polled more than 200 European companies and found the share that had not shifted part of their operations from the world’s No 2 economy to Vietnam had dropped from 76 per cent to 31 per cent over the same period.
. . . In a separate survey on Tuesday by the German online container logistics platform, Container xChange, 67 per cent of the 2,600 respondents from more than 20 countries said they were considering alternatives for production and manufacturing after China’s zero-Covid restrictions. Vietnam and India are considered the most attractive destinations.
Vietnam has been working diligently to to attract China's frustrated manufacturers. The country "became the destination of choice for firms looking to avoid" the US-China trade war tariffs during the Trump administration, but then faced its own supply chain problems "as parts from China stop[ped] flowing” during the original outbreak, according to a 2020 SCMP report.
In March 2022, when Vietnam fully reopened its borders, many business owners in both, hi-tech and low-end sectors adjusted strategies to continue as companies there "with factories in China," SCMP's Erika Na said. Others have exponentially increased their Vietnam investments.
But uncertainty lingers over how to best hedge business continuity as Xi Jinping continues to threaten Taiwan and expand China’s military presence in the South China Sea.
SCMP:
Bruno Jaspaert, CEO of DEEP C, one of Vietnam’s biggest industrial estates, said more factors were at play and investors were being very strategic and their moves had long-term implications. The industrial estate in Haiphong is where Taiwanese electronics manufacturer Pegatron, a supplier to Apple, is building a US$1 billion manufacturing facility. Pegatron also has factories in China.
“The complete breakdown in logistics and supply chains recently, due to both Covid-19 and enormously congested ports, created the awareness among supply chain specialists that going for a few mega factories and shipping everything from there is cost efficient only when everything is OK,” Jaspaert said.
“But the question is – will the world ever be a very stable place in the next 10 to 15 years, with no big problems?”
Another thing to consider, is that, while Vietnam might be pro-business now, it is still ruled by a communist dictatorship. The world was abruptly reminded of that fact earlier this week, when President Nguyen Xuan Phuc was forced to resign after Vietnam’s ruling Communist Party accused him of “violations and wrongdoing,” as CNN reported. Phuc “is the highest-ranking official targeted by the party’s sweeping corruption crackdown,” it said.
CNN:
Le Hong Hiep of the Vietnam Studies Programme at the Singapore’s ISEAS-Yusof Ishak Institute said the purge could pave the way for cleaner, more capable leaders to rise.
“As long as the leadership reshuffles do not lead to radical policy changes, their impact on the economy will also be limited,” Hiep posted on his Facebook account.
However, Ha Hoang Hop, a senior visiting fellow at the same institute, said Phuc’s demise and uncertainty over the impact of the crackdown could unnerve investors.
“This could lead Vietnam to a time of instability that would worry foreign friends and investors,” he said.
For the rest of SCMP’s report, European firms leaving China for Vietnam heralds ‘shift in narrative’, click here. For SCMP’s report, China’s zero-Covid policy has some manufacturers asking, ‘Should we stay or should we go?’, click here.
For Erica Na’s series on Vietnam’s development (also in SCMP), How China’s zero-Covid policy triggered a new wave of investor interest in Vietnam, click here. For CNN’s update, Vietnam President Nguyen Xuan Phuc quits amid Communist Party corruption crackdown, click here.
Law and International Xi
Biden hits Macau with chip controls as Netherlands, Japan signal support on bans
Keep reading with a 7-day free trial
Subscribe to China Boss News to keep reading this post and get 7 days of free access to the full post archives.