China’s world’s factory tag threatened by Vietnam, but ‘there’s nothing to worry about’, analysts say

Worries that Vietnam could replace China to become the new manufacturing powerhouse are overstated, according to analysts, despite lockdowns and stringent coronavirus restrictions shifting orders to Southeast Asia.

Headlines have been stirring up controversy in the world’s second largest economy since Vietnam’s first quarter exports reached US$88.58 billion, up by 12.9 per cent from the previous year, according to Vietnam’s Ministry of Industry and Trade.

Chinese state media reports converted the value of Vietnam’s first quarter exports to 564.8 billion yuan at the time, exceeding the 407.6 billion yuan shipped from China’s main export hub of Shenzhen in the first three months of the year.

But industries will inevitably cluster in Southeast Asia to take advantage of lower costs, and China’s upgraded industrial chain will remain vital in the region and beyond, the analysts added.

“There’s nothing to worry about in terms of manufacturing industries in China offshoring to Southeast Asia, because those that left were low in the value chain,” said Yao Yang, an economist and professor with the National School of Development at Peking University during an event last week.