Chinese investments in Vietnam: brief analysis and prospects
This article was originally published in Italian in Panorama on 26th April 2024.
Please note that this is a courtesy translation of the Italian language article originally published in the Panorama Magazine Issue at: https://www.panorama.it/news/dal-mondo/investimenti-cina-vietnam-prospettive-futuro
On December 12th, 2023, Chinese President Xi Jinping embarked on a landmark state visit to Vietnam, commemorating the 74th anniversary of diplomatic relations between the two countries. During this visit, 36 cooperation agreements were signed, further solidifying the bonds between China and Vietnam and underscoring their mutual dedication to enhancing trade and investment relations.
Foreword: History and Foundations of Relations between China and Vietnam
The economic alliance between China and Vietnam is built on a robust foundation, intertwining geographical proximity, a shared history spanning thousands of years, and complementary economic interests. Their close geographical proximity, marked by over 1,300 kilometers of shared land border, has fostered seamless exchanges of goods, resources, and ideas. This has significantly contributed to the evolution of trade and cultural connections over the centuries.
The shared history, dating back millennia, has spanned several eras characterized by cultural, commercial, and political influences. This rich historical heritage creates a fertile basis for mutual understanding and trust-building, going beyond contemporary political and economic changes.
Complementary economic interests serve as the cornerstone of this partnership. China, a global manufacturing giant, has identified Vietnam as a strategic ally to bolster its footprint in Southeast Asia, leveraging skilled labor and competitive production costs. Concurrently, Vietnam has emerged as a pivotal player in the global manufacturing ecosystem, providing distinctive resources and expertise. This synergy has cultivated a conducive environment for mutual investment, bolstering the economic advancement of both countries.
The economic ties between China and Vietnam have been strengthened by regional and global initiatives. Engagement in ASEAN and the Belt and Road Initiative has established a structured framework for deepening economic collaboration, enhancing infrastructure, and facilitating trade. This has significantly contributed to sustainable economic growth in the region.
The Rise of Chinese Investment in Vietnam
From a business standpoint, Foreign Direct Investment (FDI) from China to Vietnam has seen a substantial rise over the past five years, propelled by the 'China + 1' strategy. In 2023, China channeled close to $1.3 billion into 233 projects in Vietnam, securing a sixth place ranking among 144 countries investing in the nation. This upward trajectory has fostered optimistic projections for 2024 across various industries.
Key Sectors: Automotive, Energy, Textiles and Transport
The automotive sector has garnered substantial investment interest, with Cherry Automobile allocating USD 800 million for a factory in Thai Binh, and Tesla competitor BYD Auto planning a USD 250 million facility in Phu Tho, focusing on spare parts production.
In the energy industry, Trina Solar increased its investment in Thai Nguyen with USD 420 million for photovoltaic panel production, joining Jinko Solar's USD 1.5 billion project, which started in October 2023.
Tycoon Ma Jianrong played a key role in the textile and clothing industry, investing over USD 700 million to bolster production at the Shenzhou International Textile Group through its subsidiaries, Worldon Vietnam and Gain Lucky. This initiative has created nearly 8,000 jobs by the end of 2023.
In the transport sector, the launch of the new warehouses of Cainiao, the logistics arm of Alibaba Group, and the established presence of companies such as SF Express, Sinotrans and Oocl have further strengthened China's position in Vietnam.
Significant manufacturing initiatives include Cayi Group's establishment of a factory in Bac Ninh province, an international wholesaler of stainless steel tools, and Yangjie Technology's expansion, a prominent semiconductor company listed on the Shenzhen Stock Exchange, also located in the same province.
Perspectives for 2024: Growth and Cooperation
Looking ahead to 2024, Foreign Direct Investment (FDI) from China to Vietnam is anticipated to continue its upward trend, bolstered by mutual initiatives from heads of state aimed at fostering post-pandemic economic recovery. The commitment to bolster cooperation in high-tech and the digital economy signals a shift towards high value-added sectors.
Key Factors: Geographical Location and Historical Relations
The geographical location and historical relationship between China and Vietnam, both socialist countries adjacent to each other, are crucial for bilateral development. These factors, together with complementary interests and strong diplomatic relations, offer prospects and potential for established trade and investment cooperation.
In Conclusion
Increased Chinese investment in Vietnam is a phenomenon of global significance, promising economic benefits and greater integration between the two nations. Sectoral diversification of investment and a focus on high value-added sectors indicate an economic partnership that looks to the future, promoting sustainable development and shared prosperity. China and Vietnam are on the path of an increasingly close collaboration, shaped by economic growth and a shared vision for the future. Italy, as Europe's second-largest manufacturing powerhouse, can contribute to this burgeoning partnership between Vietnam and China by offering its technological expertise and enhancing Vietnam's value chain. As per data from the ICE office in 2023, approximately 110 Italian companies are currently operating in Vietnam, with the number of investments steadily on the rise.
Edited by: Lawyer Carlo Diego D'Andrea, Vice President of the European Union Chamber of Commerce in China
