Chinese manufacturing companies are targeting the “Made in Vietnam” dividend

The free trade agreement and the Trans-Pacific Partnership Agreement (TPP) signed between Vietnam and the EU last year will give the country the opportunity to enter a market with a combined GDP of US$44 trillion. Although the fate of the TPP is currently unknown, Chinese companies have made plans in advance to try to take advantage of Vietnam’s lower factory wages. Importantly, setting up factories in Vietnam would give Chinese manufacturers access to trade agreements that China is not currently a party to. Nguyen Sun Quan, chairman of the Vietnam Timber and Forest Products Association, said: “So far, more than 30 Chinese timber companies have consulted me this year.”

In 2015, China’s capital inflows into Vietnam doubled from a year ago, reaching US$744 million, 80% of which came in the second half of the year – not long before Vietnam signed the free trade agreement and TPP with the EU. According to the requirements of these two agreements, fabric manufacturers must use local yarns and dyes from countries within the trading bloc. For Chinese companies in Vietnam, this means ensuring access to local supply chains. To this end, China Tianhong Fabric Group is currently building a US$450 million industrial park in northern Vietnam.

It is true that the US presidential election has put a big question mark on the TPP. But even if the future of the TPP is uncertain, Chinese companies can still seek to leverage Vietnam’s strength as an emerging industrial and trading power.

Ironically, agreements like the TPP, intended to promote U.S. influence in Asia and curb China’s, actually encourage Beijing’s foreign engagement. Rising investment from China is changing Vietnam in other ways, too.

In Vietnam, anti-China sentiment has a long history. But there are signs that Vietnamese are now putting nationalism aside and learning Chinese in hopes of finding jobs with Chinese companies and investors. College student Mingying takes Chinese classes at night, “I don’t like China or Chinese people, but more and more of their companies are coming here. Being able to speak Chinese can increase my employment opportunities and help me get a good job with good pay.” ”

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