Is Vietnamese Labor the Answer to China?

Over the past few decades, Vietnam has been active in signing bilateral trade agreements with nations throughout the world. Its membership in the Association of Southeast Asian Nations make it a party at many FTAs. Additionally, the coming comprehensive and progressive agreement for the Trans Pacific Partnership and the Vietnam – EU Agreement will propel Vietnam to becoming an even more competitive business environment. The grade of product quality, production, and the rights of the employees guaranteed in these agreements may allow Vietnam to become a hub and expand as a base.

Vietnam’s close proximity to China is further helping it becoming a production hub. Cities like Hai Phong in Vietnam are very close to China’s manufacturing center in Shenzhen. By situating facilities close to conventional hubs in China, producers have the ability to reduce prices with limited interruptions or delays in existing supply chains. Additionally, many factories in Vietnam are overseas owned with investments from Taiwan, China, and South Korea. This makes transitioning from China to Vietnam smoother, making it simpler to transfer checklists, specifications, or other merchandise information.

Vietnam has low labor costs with considerably low monthly minimum wages. These wages are around 50% of what China’s are in various provinces, which vary by region. China is known to dominate the production business, but with wage growth, many companies have already moved operations to keep gross profits in cost effective production. Additionally, China’s aging population has generated labor shortages in the production industry. The most common products are custom plastics, canvas products like custom tote bags, utencils, and numerous other low cost items that are produced at bulk. China has grown considerably as a world power through economic growth by producing these low cost items. If Vietnam cuts into this space, China’s economy will feel the impact of it. However, Vietnam still needs to develop skilled workforce, it’s got a young, dynamic workforce that’s ready to fill the gap.