China-Vietnam!

Towards lower cost countries
With the rise of wages in China, some producers, both foreign and Chinese, have in recent years moved their factories to countries with more attractive cost prices, mainly in the South-East Asian region. The trade war between the United States and China has also contributed to this migration. The current health crisis highlights the world’s dependence on China for the supply of medical equipment. This trend will continue to grow.

Vietnam

Towards Vietnam
Vietnam has been the big winner in this transformation, not only in the textile sector but also in other sectors with higher added value. The Korean company Samsung, for example, has closed its factories in China and now produces the majority of its telephones in Vietnam while taking other Korean companies with it. As for Apple, it remains loyal to China, where its market is much larger than Samsung.

Vietnam 
Although Vietnam still lags behind China, in terms of infrastructure, supply chain networks and sources of raw materials, the country’s progress is fast. 
With a population of 100 million and a surface area of 330,000 km2 (almost the size of Italy), growth has been sustained and has surpassed that of China in recent years. 

GDP growth of both countries in % :

ChinaVietnam
20156,916,68
20166,746,21
20176,766,81
20186,607,08
20196,106,80

A robust economy
Thanks to a very rapid response and strict measures, the Covid outbreak did not bring the Vietnamese economy to a standstill. Its growth has nevertheless been slowed, with GDP nevertheless posting a 3.8% increase in the first quarter of 2020 compared with a 6.8% decline for its Chinese neighbor. Vietnamese household consumption is driving growth, with a contribution to GDP of around 65%, compared with less than 50% for China.

More advanced democratization
Some articles from China, which analyze the Vietnamese political system, find it quite advanced at the democratic level (compared to China, one must understand). The site “The Observer, 观察者”, in an article, The “Four Horses” of “the advanced democratization of the Vietnamese political system, 越南政治体制 “超前民主化 “中的 “四驾马车” , reminds us that power is less concentrated and more divided between “four horses”: the Secretary General of the Party, the President of the State, the Prime Minister and the President of the National Assembly, who have real power of control and counter-power among themselves. Numerous measures for greater transparency in public life have been introduced.

More fertile ground
Journalist Wang Jian 王剑, in his You Tube show on 2 May, gives four reasons for this advanced democratization compared to China:

  1. The Vietnamese Communist Party did not have a real great leader after the death of Ho Chi Minh in 1969.
  2. The South of Vietnam lived until 1975 in a more democratic system than in the North with a more developed economy. A more fertile ground already existed for democracy when Vietnam opened up in the mid-1980s.
  3. The country did not experience major catastrophes such as the Great Leap Forward or the Cultural Revolution.
  4. The central government has never been as centralized and strong as in China in history.

It is of course a bit early to say that Vietnam will take the title of “World Factory”.  The size of its offer remains small compared to the Chinese giant and its main asset in terms of cost price is not always strong enough to convince some groups to move to Vietnam. A long movement is certainly underway, we won’t talk about a groundswell.

Published on May 9, 2020

Posted on Categories Economy

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