trade war pushing companies from china to vietnam, but experts warn they may have missed the boat - chinese appliance manufacturers

In 1993, when Ernie Koh first opened a production plant in Vietnam to produce furniture, the Southeast Asian country was not concerned by many manufacturers, but 25 years later, the company moved there in droves.
Rising wages and improving environmental regulations mean that the manufacturing giant in southern China, Guangdong, is no longer
Vietnam used to be a cost center and for many companies it has always been seen as a logical choice. The US-
China's trade war, which is due to escalate on Friday, plans to raise China's export tariffs to the United States from 10 to 25, which has accelerated this trend.
In the first quarter of 2019, foreign investment in Vietnam increased by 86.
2 cents to $10.
8 billion. according to the Chinese government, Chinese investment accounts for almost half of that.
Business Securities Times.
Koh, executive director of Singapore furniture maker Koda, operates factories in Malaysia and Vietnam, and while he is fully committed to investing in Vietnam, he is now concerned that parts of China are working to cope with the influx of large numbers of companies, many of them are seeking to avoid trade war tariffs.
"Buildings are everywhere.
"Roads are more crowded and traffic jams are getting worse," Koh said . ".
"Port congestion has been very different over the past two years.
Now we have to book space on board two weeks in advance.
We don't need to do this before.
Vietnam's economy grew by seven.
The proportion of last year was 6.
Although it has attracted a large number of multinational companies including Intel, Samsung and LG, all of them have invested heavily.
Fred Burke, managing partner at Baker McKenzie's Vietnam office, notes that even before the trade war, a large number of Chinese manufacturers entered Vietnam.
"It's just a variety of people who come in.
Several people came in and said they were being hit by the US import tax on Chinese exports.
As a result, people make emergency exit signs, brake cables and other things, as well as various specific items that are costly.
Plus made in China, "Burke said.
However, Vietnamese companies are trying to bypass US trade war tariffs on China, which is known for its high quality manufacturing and first-class products.
Vietnam's infrastructure is not yet mature.
"Vietnamese workers really don't get training at the Chinese level, starting with the construction of your factory or the road to get there.
China has done a very good job in infrastructure, and some people just take it for granted that it is high everywhere.
High speed rail and everything.
But in Vietnam, they just started making these things.
They have their first [
Underground train
"In the next year or two, the Ho Chi Minh City line will go online," Burke said . ".
Chinese business outflows are forecast to continue, especially as US President Donald Trump prepares to push the trade war to a higher level.
But as land and labor costs rise, port bottlenecks, road traffic jams, and a rapid decline in production capacity, experts warn, those who have not yet arrived in Vietnam may have missed the ship.
"Last year, several manufacturers tried to relocate to Vietnam to offset the impact of the trade war," said Kong Xiangping, general manager of Ho Chi Minh City branch of Yongsheng Service Group, a Taiwanese consulting firm.
"The land price at that time was about $60 per square meter (11 sq ft).
The companies decided not to move to Vietnam because they thought the risk of a trade war had eased.
They must now regret their decision because land prices have risen sharply to more than $100 this year.
Previously, only $5 to $10 per square meter per year.
Vietnam's population is roughly the same as that of China's Guangdong province, while the manufacturing base in southern China has a population of 104.
3 million, Vietnam is 95. 5 million.
But while Guangdong can attract large numbers of migrant workers from other parts of China, Vietnam cannot.
According to the official database of Vietnam, there are 9 people.
In 2017, there were 3 million workers in the country's manufacturing industry.
In contrast, there are 12 manufacturing employees in Guangdong province alone.
According to statistics from the Guangdong Provincial Bureau of Statistics, in September 2018, 71 million people, accounting for 58 of the total labor force.
Guangdong province is the most populous province in China, with more than 50 million people in 10 other provinces.
This means that companies that have been established in Vietnam have hired skilled employees, and high turnover and poaching talent are the cause of the anxiety of many people in the country, limiting Vietnam to become a "new China ", even the possibility of "new Guangdong.
Wilkie Wong is managing director of Esquel Group, the world's largest woven shirt manufacturer, which produces about 100 million shirts a year.
The company is a Chinese company, but it has been in Vietnam for 15 years.
"In the past, we had workers strike in Vietnam, but we haven't had this problem for many years.
This is because we have improved the way we work with workers to help them improve their productivity, so that they can make more money . "
"At one of our factories, we have people queuing up every day to find a job at our gate.
I mean, it's because of word of mouth.
So if we can be the preferred employer then we can ease some of the problems in Vietnam. ”. . . .
Of the additional goods sent to us by China, there is still no tariff, but it will soon be levied at a rate of 25%.
Tariffs paid to the United States have little impact on product costs, mainly borne by China.
Trade deals with China continue as they try to renegotiate, but progress is too slow. No! —Donald J. Trump (
@ RealDonaldTrump)
However, in May 5, 2019, it was difficult for some Chinese manufacturers to recruit people with the necessary language skills in Vietnam, especially in the largest metropolis of Vietnam, Ho Chi Minh City and its surrounding industrial centers.
"Chinese manufacturers have been increasing their investment in Vietnam in recent years, but there is a shortage of Chinese speakers," said Zhang Diansheng, general manager of Ho Chi Minh City.
Headquartered in Hengxin consulting company.
"It is increasingly difficult to recruit workers around Ho Chi Minh City.
Factories even fight each other for more workers.
It is easier to find more labor in remote areas, but in less developed cities, workers are less professional.
"This has enabled businesses to move from traditional manufacturing centers to more remote locations in Vietnam, where infrastructure is less developed.
It also prompted companies to look for alternative locations across Southeast Asia.
Among them are Malaysia, the signatory of the Trans-state organization agreement on comprehensive progress
Pacific Partnership (CPTPP)
It offers preferential access to markets such as Australia, Canada, Japan and Mexico, and Indonesia, where multinationals have been building manufacturing bases in free markets
Batam island's trade zone, an hour ferry tour from Singapore.
Last year, Taiwan's iPhone assembly company, Pegatron, announced the transfer of production from China to Batam to avoid tariffs in the United States.
The factory is scheduled to start production in April.
Home appliance maker Phillips also has a large factory on the island that produces products such as razors and irons.
Anglia Zhou, founder of Singapore
Consulting firm AC Trade Advisory said Vietnam and Batam Island are the areas where her clients are most interested.
"Batam is one of Indonesia's most successful trade zones because it is very close to Singapore," she said . " She added that despite concerns about capacity and infrastructure, she remained bullish on Vietnam.
"The advantage is that Vietnam has a free trade agreement with the EU and CPTPP.
Now I see a lot of Chinese investment in Vietnam.
So if you want to move in the near future, this is still the best option.
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