Chinese manufacturers returning home from ‘inefficient’ Vietnam despite US trade war tariffs
- Rising costs of labour and land in Southeast Asian nation, as well as inability to find ‘efficient’ workers, forcing some firms to reconsider fleeing Donald Trump’s tariffs
- President Xi Jinping agreed a tariff truce with his US counterpart at the G20 summit in Osaka, but firms now exploring options in Thailand, Bangladesh and Myanmar
As the US trade war hastens the surge of factories moving out of China and into Vietnam, some Chinese manufacturers are urging their peers to think twice before relocating, with one footwear factory owner having abandoned a 5 million yuan (US$728,000) factory in the Southeast Asian country after just one year.
Zhou Ping has run a footwear factory in Dongguan, a city in China’s manufacturing heartland of Guangdong, since the early-2000s. But in May 2017, Zhou and another factory owner took a two-year contract on a 1,200 square metre (12,916 sq ft) facility in Binh Duong province, just north of Ho Chi Minh City, with the intention of producing accessories for a US fashion brand.
“We thought it a very good idea at the time because, on the surface, Vietnam’s factory buildings and labour were much cheaper than Dongguan, and we saw more and more European and American customers placing orders in Vietnam. A large number of upstream factories had shifted there, so we set up four production lines and hired 110 local workers. At that time, there was no trade war, and [the term] ‘made in Vietnam’ was still far from being hot,” he said.
In October 2018, however, Zhou cut his losses in Vietnam due to rising costs and “cultural issues”.
“The gap in worker efficiency between China and Vietnam is the biggest problem,” Zhou said. “Vietnamese workers do not work overtime at all and most of them are not skilled, resulting in low yield rates and frequently delayed delivery times. I think it takes a great deal of time and expense to train skilled workers in Vietnam. Chinese [small businesses] of our kind can’t afford this cost, both in terms of time and money.”