Vietnam’s GDP rose a horrific 8.2%, but that might not be such a bad thing for China

According to data released not long ago, Vietnam’s gross domestic product (GDP) will grow explosively by 8.02% in 2022. This growth rate not only hit a new high in Vietnam since 1997, but also the fastest growth rate among the world’s top 40 economies in 2022. Fast.

Many analysts point out that this is mainly due to its strong export and domestic retail industry. Judging from the data released by the General Statistics Office of Vietnam, Vietnam’s export volume will reach US$371.85 billion (approximately RMB 2.6 trillion) in 2022, an increase of 10.6%, while the retail industry will increase by 19.8%.

Such achievements are even more “horrifying” in 2022 when the global economy is facing challenges. In the eyes of Chinese manufacturing practitioners who were once hit by the epidemic, there was also concern that “Vietnam will replace China as the next world factory”.

But many of these worries come from people who imagine Vietnam from afar. In the eyes of those Chinese practitioners who are really “scrambling” in the manufacturing industry in various cities in Vietnam, a Vietnam that can still “break 8” is not good for China. Not a bad thing to say.

The advanced Vietnam imagined

The imagined Vietnam looks young, restless and full of opportunities for overtaking on corners. But in fact, some “advantages” really only stay in the imagination.

Zhao Yanping, who has been in Vietnam for three years, is not very excited about the sudden rise of Vietnam fever in 2022.

He is in charge of the supplier team in Vietnam at Ali International Station. As a senior Ali Tiejun who was in charge of the domestic central and western markets, Zhao Yanping took the initiative to come to Vietnam in 2020 following the adjustment of Alibaba’s international strategy. The country with a billion-dollar market is similar to the domestic Guangxi and Guizhou markets. His experience in developing foreign trade customers in the mountains of these two regions should also be reused in the Vietnam market to a certain extent.

However, after landing in Vietnam, he was still surprised by the wild and barren digital environment here.

On the whole, with the development of Southeast Asian e-commerce platforms Shopee, Lazada, and Vietnamese local e-commerce platform Tiki in recent years, certain online consumption habits have indeed been established among C-end users, which has also stimulated the development of local To C e-commerce business . However, for Ali International’s main foreign trade To B business, Vietnam’s local foreign trade digitization is not even in its infancy.

This means that a considerable amount of time is spent on training and education of local employees and Vietnamese suppliers before making a big splash in the business.

Just recruiting Vietnamese local employees is a very headache. According to the overall business process, the staffing of operators, distributors, and the field department is mainly arranged to make the business run first. However, when recruiting employees in Vietnam, it was found that the local talents who understand the Internet industry are really There are too few. Even those who come from the largest local Internet e-commerce platforms have a blank sheet of paper for To B foreign trade business.

“It is almost impossible to find people who understand products, business, operations, and business, so when we recruit people here, we can only look at their comprehensive ability and quality. It usually takes three months from training to employment. “Zhao Yanping said that according to their domestic employment standards, it is difficult to find high-level talents in the Vietnamese market. Although the local population structure is younger, the age of available talents is generally too old.

Zhao Yanping is in charge of the Vietnamese supplier team of Ali International Station. The work content can be understood as the promotion of the internationalization of the Internet. Sales staff need to contact Vietnamese local sellers and factories to introduce them to the Ali International Station platform. Global buyers provide products made in Vietnam, and on the other hand, it also connects more overseas buyers with local Vietnamese manufacturers.

Ali International Station, a digital platform that connects the supply and demand ends of Vietnam’s foreign trade, should take advantage of the window period when Vietnam’s labor-intensive manufacturing industry takes off, and it should advance very smoothly.

But things are not that simple.

The first is the difficulty of reaching cooperation with suppliers. Most factories in Vietnam are located in the fringe areas of cities. Even due to the increase in production costs in recent years, local factories in Vietnam have a tendency to collectively transfer to the central and northern villages. This is undoubtedly difficult for the sales promotion team responsible for supplier expansion. It’s even harder.

“And it’s hard for you to imagine that Vietnam doesn’t have the habit of door-to-door sales. If you start a company in China, there are people who come to sell products and services every day, so the local push team can do offline coverage, but in Vietnam, The locals are more used to telemarketing, but even if you contact the supplier boss by phone, you still don’t know what his offline factory looks like.”

In addition to the differences in sales methods, the Vietnamese employees’ acceptance of ground pushing itself has also become an obstacle.

We must know that whether it is the domestic e-commerce platform Taobao or the takeaway and life service platform Meituan, their early rise has largely relied on the business development capabilities of the local push team.

But those experiences seem to have failed in Vietnam.

“Vietnamese people don’t want to go to the factory. Here we pay the sales staff a lot of money but can’t get results. Vietnamese boys are generally very leisurely, and everyone here rides a motorcycle. It takes about two hours for us to meet a customer. Well, seeing two of them every day would be great.”

Source: Internet

Many Vietnamese suppliers who have worked hard to introduce to the platform have no Internet operation capabilities at all. In the eyes of these Vietnamese local manufacturers, this digital platform is still just a webpage. They expect to open a store and put products on it, and a steady stream of overseas orders will naturally be delivered to them.

“They don’t know how to operate, and they won’t continue to follow up with overseas buyers to communicate, promote, and complete the process. The traffic of each platform is not free. The operation link of To B foreign trade is actually better than that of To B. The C business is much deeper, but most Vietnamese suppliers don’t understand it.”

Obviously, compared with the highly specialized, industrialized, and digitalized Chinese foreign trade sellers, Vietnamese local foreign trade merchants are still in the early stages of accessing the Internet.

“Vietnam has absolutely no sign of this”

In fact, until 2022, Vietnam’s manufacturing industry has also been in a state of suspension due to the impact of the epidemic.

In 2021, the local manufacturing factories and upstream and downstream enterprises in the supply chain were forced to suspend production and production, and the front-line workshops were in short supply. According to statistics from the Vietnamese government, the number of workers returning home during the peak period of the epidemic was as high as 2 million, including Nike, Apple, Enterprises such as Intel and Samsung that set up factories in Vietnam have encountered a production crisis. Nike has reduced the supply of 180 million pairs of shoes because of this, and Samsung has shut down factories in Vietnam one after another and carried out large-scale layoffs.

Zhao Yanping was also trapped in Vietnam for more than half a year due to the epidemic. With the local people lying flat, most of the Vietnamese employees of the supplier team he led were also recruited to rest at home. While quarantining with the remaining four Chinese employees, he visited customers online and relied on a small supermarket downstairs to buy daily necessities.

After Vietnam fully relaxed control measures in early 2022, the local manufacturing industry quickly resumed normal production and took on many manufacturing orders from China in the past. In addition, Vietnam canceled the upper limit of foreign shareholding ratio in early 2022, which once set off a wave of foreign companies coming here. With the upsurge of investing in factories, Vietnam’s property market and stock market have also risen accordingly.

However, behind this growth, hidden worries are becoming more and more obvious: Vietnam’s economy is driven by manufacturing, but the manufacturing industry is controlled by foreign capital.

“To put it bluntly, Vietnam’s manufacturing industry means that foreigners come here to engage in foreign trade.” This is the common understanding of Vietnam when I talk about Vietnam with many Chinese foreign trade practitioners in 2022.

Take Samsung, the foreign company with the largest investment in Vietnam, as an example. Its company revenue in Vietnam in 2021 will total 74.2 billion US dollars, which is equivalent to 20.46% of Vietnam’s GDP in the same period. For Samsung, more than half of its mobile phone exports and one-third One of the electronic product shipments is completed by its factory in Vietnam.

Vietnam’s manufacturing industry also remains highly dependent on American shoe and apparel brands. According to public information, nearly 50% of the shoes of Nike and Adidas are made in Vietnam, while 1/3 of the footwear products and 1/5 of the clothing in the US market are processed and manufactured in Vietnam.

Whether it is the supply side or the demand side, Vietnam’s manufacturing industry is subject to foreign capital and overseas market demand, and continues to improve as its own scale grows.

From the perspective of the supply side, foreign-funded enterprises either directly invest and set up factories in Vietnam, or encourage upstream and downstream enterprises in the supply chain to relocate to Vietnam to build and produce factories. The two models rely more on cheap local labor and preferential policies in Vietnam The export tariff policy, but in essence, did not drive the supporting production capacity of local Vietnamese enterprises.

“Many people compare the current Vietnam to China in the 1990s, but in fact the two are very different. At that time, foreign-funded companies such as Nike and Adidas entered China, which really drove the supporting production capacity of the domestic manufacturing industry. With this We are slowly developing this ability into our own supply chain system, from which our own brand and R&D technology can be born, but there is currently no sign of this in Vietnam.”

He observed that, in addition to the fact that Vietnamese local enterprises have not been able to integrate into the core manufacturing links dominated by foreign capital, many foreign companies that have moved to Vietnam have actually only put a certain link in the production here, such as the final processing and assembly part, which is convenient on the one hand. Enjoying the local commodity export policy, on the other hand, it is also because most of the manufacturing links involving rapid manufacturing and machine coordination are already intertwined in China, and they cannot all be moved to Vietnam in the short term.

From the perspective of demand, the state of “ice and fire” in Vietnam’s manufacturing industry in the first half of 2022 is also inseparable from its strong dependence on foreign capital.

Since the Federal Reserve raised interest rates in the second half of 2022 to attract the return of U.S. dollars, foreign capital began to withdraw from the Vietnamese market, resulting in successive declines in the property market, stock market, and exchange rate. In September, the economic inflation in Europe and the United States caused by the European energy crisis also directly reduced its Demand for Vietnamese manufacturing.

According to local media reports in Vietnam, from September to November 2022, the shortage of manufacturing orders in Vietnam has had a huge impact on more than 630,000 workers in 28 provinces and cities. In half a year, a wave of shutdowns and layoffs broke out in many foundries in many places, and many workers even went home early for vacation.

For this reason, the Central Bank of Vietnam is trying to combat economic inflation and place large orders for the local currency by raising policy interest rates. However, if the global economy continues to fall into recession in 2023, regardless of whether the manufacturing industry can continue to drive GDP growth, Vietnam will face more difficult problems. Case.

The opportunity for Chinese companies lies in “helping” Vietnam

In the past few years of the rise of Vietnam’s manufacturing industry, many Chinese companies have also migrated here.

Compared with foreign investors in Europe, America, Japan and South Korea who value cheap labor in Vietnam’s manufacturing industry, Chinese companies often build factories in Vietnam as a way to “export”.

“Although the labor cost in Vietnam is very cheap, in fact (for Chinese companies) the overall cost is higher than that in China. This is because the entire supporting production capacity is more complete in China. It can be found within a radius of three kilometers in China, but it is not available in Vietnam.”

Many people who have expanded their business in Vietnam said that the main reason why these Chinese companies set up factories in Vietnam is to avoid the attention of Europe and the United States.

In fact, as early as more than a decade ago, when Europe and the United States raised tariffs and restricted quotas on clothing and shoes exported to China, many Chinese companies had already moved some factories from China to Vietnam. In recent years, tariffs on electronic products exported from China have been further raised, which has once again triggered a large number of Chinese electronic consumer companies to relocate their final production links to Vietnam.

In other words, there is more direct competition between Vietnam and China than in manufacturing.

Source: Internet

According to the latest research report released by the World Data Lab, Vietnam will have more than 23.2 million middle-class people in 2030, becoming the third largest consumer market in Southeast Asia after Indonesia and the Philippines.

In fact, including the popular performance of TikTok live e-commerce in Vietnam, the success of domestic game e-sports in Vietnam, and the popularity of domestic film and television dramas in Vietnam, all illustrate the advantages of Chinese companies here.

In October 2022, China and Vietnam signed 13 cooperation documents, most of which were related to economic and trade exchanges, while supply chain cooperation was frequently mentioned. For Vietnam, one of the effects of deepening supply chain cooperation between the two countries is to gradually reduce its dependence on foreign investment from Europe, America, Japan and South Korea.

In the past three years, Zhao Yanping has managed 1,800 local Vietnamese companies to settle in Ali International Station, and has maintained a penetration rate of 2% per year. In 2021, overseas buyers will not be able to purchase offline in Vietnam, and can only find sources of goods online. “We took this opportunity to be an online salon to attract customers, and found sales for the inventory in the warehouses of many Vietnamese suppliers.”

In 2022, the problem of Vietnam’s local foreign trade will turn to the demand side, and orders from Europe and the United States will be greatly reduced due to economic inflation. They will once again help Vietnamese suppliers find suitable buyers overseas through the Internet platform.

“Our plan for 2023 is to increase the training of suppliers’ capabilities, such as the e-commerce operation capabilities of Vietnamese local companies. For them, e-commerce capabilities can directly stimulate the entire foreign trade.”

Facing Vietnam, what is needed is not the anxiety of being “replaced”. When foreign investors from Europe, the United States, Japan and South Korea still value the cost dividend brought by Vietnam’s low labor force to the manufacturing industry, Chinese companies can better understand the dividend itself of Vietnam’s rapid development, and better understand what Vietnam needs most at the moment when it maintains a high-speed growth and maintains a GDP of over 8. Things, the industrial chain construction capabilities and digital transformation capabilities accumulated by Chinese companies over the years are exactly what Vietnam really needs.

“The best Vietnam can do is to find Vietnam’s comparative advantages in its economic ties with China, embed itself in a reasonable position, and develop along with China’s ride.” A Vietnamese expert described it this way.

Finding this reasonable position is also something that Chinese companies should really consider when facing Vietnam’s rapid growth. Having found this reasonable position, a Vietnam whose GDP continues to soar will not be a bad thing for China.