Unlock the Editor’s Digest without spending a dime
Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly e-newsletter.
Chinese language firms are fuelling virtually one in three new investments in Vietnam, in an indication of how they’ve relocated operations overseas to keep away from Donald Trump’s commerce warfare with Beijing.
However this shift is prone to enhance Vietnam’s vulnerability to tariffs as Trump targets international locations which have racked up huge commerce surpluses with the US.
Vietnam has been one of many greatest beneficiaries of commerce tensions between the world’s two largest economies. Its surplus with the US reached a file $123.5bn final 12 months, the third-largest after China and Mexico.
A part of that has been pushed by the exports of firms corresponding to Apple and Intel, which have moved manufacturing traces from China to Vietnam to unfold provide chain dangers and keep away from punitive tariffs.
However Vietnam can be more and more getting funding from Chinese language firms, accounting for 28 per cent of latest initiatives final 12 months, up from 22 per cent in 2023.
“Chinese language capital is pressured to return to Vietnam, despite the fact that it’s not low-cost any extra,” stated Meir Tlebalde, chief govt of Sunwah Kirin Consulting Vietnam, which advises international buyers.
She stated many Chinese language purchasers had been below stress from patrons within the US and Europe to maneuver out of China.
Most Chinese language manufacturing investments in Vietnam had been being made to keep away from US tariffs and safe a distinct “certificates of origin” for items produced by Chinese language firms, she stated.
Nevertheless, Vietnam’s provide chain remains to be extremely reliant on China. “At the very least half of the uncooked supplies come from China,” stated Tlebalde.
Within the first month of 2025, Chinese language firms accounted for 30 per cent of initiatives, in line with the newest authorities information. Chinese language investments additionally got here by way of Hong Kong and Singapore, the latter of which was the highest investor in greenback phrases in Vietnam final 12 months, analysts stated.
The surge in Chinese language investments in Vietnam and its dependence on Chinese language uncooked supplies may appeal to renewed scrutiny from the Trump administration, which has accused Beijing of circumventing tariffs by sending merchandise by way of third international locations.
Vietnam, as with many different international locations, can be extremely uncovered to Trump’s threats of reciprocal tariffs on US buying and selling companions. He has additionally threatened to levy 25 per cent tariffs on metal imports, which may additionally hit Vietnam, the US’s fifth-biggest provider of the steel.
Excessive tariffs would have a big effect on Vietnam’s economic system, deterring funding and placing a damper on one of many quickest progress charges on this planet. The US accounts for practically 30 per cent of Vietnam’s exports.
“There are some issues that the US may see that [increased Chinese investment] as oblique tariff avoidance by Chinese language firms, they usually may examine extra items coming from Vietnam,” stated Jack Nguyen, chief govt of Incorp Vietnam, which advises international buyers within the nation.
Most Chinese language funding in Vietnam is in meeting and low-to-mid-end manufacturing, from automobiles to photo voltaic panels. China’s strict curbs in the course of the Covid-19 pandemic additionally pushed some firms to diversify outdoors the nation.
A small share of Chinese language items had been additionally relabelled “Made in Vietnam” with none value-added and rerouted to the US, specialists stated, a observe that’s unlawful.
Hanoi had already elevated due diligence on Chinese language merchandise and investments, Nguyen stated. “They’d not enable Vietnam for use as a transshipment nation to the US on the danger of the US coming down onerous on Vietnam.”
Vietnam’s Prime Minister Pham Minh Chinh acknowledged dangers to his nation, telling an viewers in Davos final month that Hanoi was growing “political and financial options” to deal with its commerce imbalance.
He added that Vietnam would buy between 50 and 100 planes from Boeing within the subsequent 10 years in addition to different high-tech US tools — and agreed to golf with Trump “all day lengthy” if wanted.
This month, commerce minister Nguyen Hong Dien stated Vietnam was keen to extend agricultural imports from the US and that it might not impose any measures that may prohibit commerce with the US.
Vietnam might also must step up stress on the rerouting of Chinese language merchandise. Hung Nguyen, a provide chain professional on the RMIT College Vietnam, stated Hanoi may push Chinese language firms to put money into higher-value manufacturing and tighten native content material necessities to drive them to arrange a provide chain within the nation.
“I anticipate [Vietnam] will use technical limitations to reject some Chinese language investments,” he stated.
However Nguyen Khac Giang, a visiting fellow at Singapore’s Iseas-Yusof Ishak Institute, stated Vietnam must “stroll a nice line” between China and the US, its two largest buying and selling companions.
“I might not anticipate Vietnam to brazenly push again towards Chinese language funding,” stated Giang.
Koen Soenens, normal gross sales and advertising director of business zones developer Deep C, stated 80 per cent of investments from Chinese language and Taiwanese firms in Vietnam had been from those who depended closely on exports to the US and Europe. Chinese language firms now account for over 40 per cent of Deep C’s gross sales, up from simply 15 per cent within the early 2020s.
Further reporting by Haohsiang Ko in Hong Kong
