Why Vietnam will not replace China any time soon as the world’s manufacturing hub

Not only are global companies heavily invested in Chinese manufacturing operations, they also have an eye on the country’s massive consumer market

Countries in South and Southeast Asia cannot match China’s manufacturing capacity and infrastructure

Reading Time:4 minutes

Women work at a nursery products company in Dongguan, in Guangdong province, China, in May 2019. Photo: EPA-EFE

Published: 3:00am, 7 Mar 2020Updated: 5:29am, 7 Mar 2020

Put aside the coronavirus epidemic story for a moment, and, for most media, three themes dominate discussion of China and the world economy – decoupling, relocation of manufacturing to other countries in Asia and the collapse of global supply chains.

Yet the available data – and simple common sense – suggest more complex shifts are at work, and that the crude decoupling narrative does not hold water.

It might be true that the current US administration is exerting pressure on US multinationals to bring manufacturing home to “make America great again”, and that paranoid forces in the US security community see spies in every Chinese company. Politically in the US, China is indeed being demonised, and globalisation is used as a dirty word. But the data suggests less change than the media implies.

For General Motors, which makes and sells 40 per cent of its cars in China, or Apple, which makes most of its iPhones in China with Asia accounting for a third of the company’s sales, relocation not only makes no sense – it would be ruinous.

The myth here is that China remains the world’s factory, supplying cheap, low-tech products to the wealthy markets on the back of immiserating salaries and miserable working conditions that Western workers and their unions would never tolerate.

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