With the rise of labor costs in China, Vietnam has attracted the transfer of labor-intensive industries such as Nike, Adi, Uniqlo and other labor-intensive industries with the advantage of cheap labor, coupled with the low tariffs on Vietnam and the preferential tax policies in Europe and the United States. attracted a lot of foreign investment to build factories.
借助Demographic dividendAdvantages such as tariffs and tax preferencesVietnam's economy has indeed developed rapidly in recent years. According to the World Economic Outlook, Vietnam ranked 14th with an average economic growth rate of 5.99% between 2010 and 2021, although not compared with China's 7.24%, but that growth has lagged behind many countries.
In Vietnam, where its economy is booming, stock prices and house prices have also soared.In the past decade, the Ho Chi Minh Index has more than tripled from around 400 to around 1340 today. In particular, after the epidemic in Vietnam improved in 2020 and epidemic prevention measures were liberalized, the Vietnamese stock market ushered in a wave of shock, which outperformed the global market index of 90%.
It is not only the stock market that has skyrocketed, but also house prices in Vietnam. In April, the average price of commercial housing in Ho Chi Minh City, Vietnam's economic center, reached a staggering $3300 (about 21800 yuan) per square meter, up 27% from a year earlier and the highest in nearly a decade, while average residential prices in Hanoi, the capital, also soared more than 20% from a year earlier.
The fast-growing economy, soaring stock prices and house prices show the prosperous side of Vietnam, but this is not the whole truth.
Li Ka-shing's investment in Vietnam may have taken a fancy to the real estate development opportunities in the process of urbanization in Vietnam. At the beginning, Li Ka-shing entered with abundant capital during the rapid development of real estate in mainland China around 2010. a few years later, he cashed out after a premonition that there might be a bottleneck in the mainland real estate.
In order to stimulate the economy hit hard by the epidemic, in January this year, Vietnam passed an economic stimulus policy of up to 350 trillion Vietnamese dong (US $15.21 billion), of which nearly 1/3 was used to invest in infrastructure, hoping to take the road of infrastructure-driven urbanization. There is a sense of copying China's 2008 "4 trillion" to stimulate economic operations.
From the perspective of historical experience, it is often the capital that has made a lot of money and left, leaving the speculative housing prices to the local people to bear. The current price-to-income ratio in Ho Chi Minh City is enough to make ordinary citizens desperate, let alone in the future.
In addition, although Vietnam's exports exceeded that of Shenzhen in the first quarter of this year, Shenzhen's trade surplus was more than seven times that of Vietnam. Vietnam's exports of goods totaled US $89.1 billion in the first quarter of this year, with a trade surplus of only US $1.46 billion (about 9.73 billion yuan) after deducting imports of US $87.64 billion in the same period. In the same period, Shenzhen's exports totaled 407.66 billion yuan and imports totaled 332.82 billion yuan, with a trade surplus of 74.84 billion yuan.
From GDPAccording to the data, Vietnam not only lags far behind Shenzhen, but also lags behind Guangxi.. In 2021, Vietnam's GDP is 362.6 billion US dollars (about 2.4 trillion yuan), per capita GDP is about 3700 US dollars (24000 yuan); Shenzhen GDP is 3.0664 trillion yuan; Guangxi Province is 2.474 trillion yuan, per capita GDP is 49, 000 yuan. It can be seen that last year, the GDP of Guangxi Province was higher than that of Vietnam, and the per capita GDP was more than twice that of Vietnam.
From the above data, it is not difficult to see that Vietnam is not as good as many people think, and Shenzhen is not as bad as many people think.
What's more, Vietnam is a country with a population of nearly 100 million, while Shenzhen is only a Chinese vice-provincial city with a population of more than 17 million.
And the rapid development of Vietnam's manufacturing industry in recent years is not because of its strong technology and competitiveness, butIt happens to catch up with the tuyere of industrial transfer, and happens to have the advantage of low cost, which attracts the transfer of labor-intensive industries.
01 beneficiaries of industrial transfer
In recent decades, several major shifts have taken place in the global industrial chain.
Around 1960, after the domestic industries were saturated in the United States, Japan, Germany and other developed countries, in order to reduce production costs, labor-intensive industries were gradually transferred to South Korea, Singapore, Taiwan and Hong Kong. after these places undertake the industrial transfer, the process of industrialization is accelerating, and the economy is developing rapidly, which has become the "four Little Dragons of Asia".
With the industrial upgrading of the "four Little Dragons of Asia", labor-intensive and energy-intensive industries have been transferred to Thailand, the Philippines, Malaysia, Indonesia, China and other places since 1980. With the rise of labor costs and the acceleration of industrial upgrading in China, some manufacturing industries with low added value have been gradually transferred to Vietnam.
The development of Vietnam's industry depends on industrial transfer and foreign investment. Since 2015, more than 70% of Vietnam's exports have been contributed by foreign-funded enterprises, and the growth rate of Vietnamese foreign-funded enterprises' exports is much higher than that of local enterprises.
From the perspective of import and export structureVietnam mainly imports raw materials, parts and production equipment from China, South Korea and other countries. after assembly and processing, Vietnam exports its products to the United States, the European Union and other places..
33 per cent of Vietnam's total imports come from Chinese mainland, mainly textiles, leather materials, machinery and equipment, telephones, mobile phones and spare parts. In addition to Chinese mainland, Vietnam also imports products from South Korea, Japan, Taiwan, the United States and other places.
Vietnam's largest buyer is the United States, accounting for about 29 percent of total exports, and wood and products, textiles and clothing, machinery and equipment all account for more than 40 percent of products exported to the United States. In addition to the United States, China, South Korea and Japan are also the main export targets of Vietnam.
The current industrial development model in Vietnam is similar to the processing plants in China's coastal areas 30 years ago. It relies on cheap labor to earn the money assembled in the "smile curve" of the industrial chain. The profit margin is very small, but the money in R & D, design, brand, sales and other links with large profit space is out of reach.Because Vietnam has neither technology nor market, there is only cheap labor.
Demographic dividendIt is the key to attract the transfer of labor-intensive industries. Vietnam has a population of nearly 100m. In 2017, the median age of Vietnam's population was only 30.5 years old, and the average wage was only 1/3 of that in China. A large number of young people and low average income are important advantages for the development of processing manufacturing in Vietnam.
In order to attract investment, Vietnam has given a lot of preferential policies to enterprises. According to a draft submitted by the Vietnamese Ministry of Finance in 2017, the corporate income tax rate was reduced from 20% to 17% between 2016 and 2020. And enterprises with an annual turnover of no more than 100 billion dong can enjoy tax exemption. Coupled with the low tariffs imposed on Vietnam by European and American countries, the export costs of enterprises have been further reduced.
Lower labor and rental costs, superimposed tariffs and tax concessions have enabled Vietnam to undertake the transfer of labor-intensive industries in China's coastal areas and other places, and the manufacturing industry has developed rapidly.
How far is it from the factory of the world?
The industrial transfer undertaken by Vietnam has indeed replaced some of China's export products, but they are basically low-tech products such as furniture and tires.
Imports of furniture from China by retailers such as Home Depot and Ikea fell 13.5 per cent, while imports from Vietnam rose 37.2 per cent, while imports of car tyres fell 28.6 per cent from China and surged 141.7 per cent from Vietnam, according to Panjiva, a trade data company.
Those who are really affected by Vietnam are the inland provinces that want to undertake the transfer of low-end coastal manufacturing.Because many of the manufacturing industries have not been transferred to inland provinces, but to Vietnam..In the first quarter of this year, Vietnam's foreign investment totaled US $10.8 billion, an increase of 86.2% over the same period last year, half of which came from China.
But this does not shake China's status as the "factory of the world", becauseChina's manufacturing competitiveness has risen to the second place in the world, after Germany.In April 2021, data from the United Nations Industrial Development Organization showed that China's manufacturing competitiveness had risen from the fifth in the world in 2012 to the second. China has completed nearly US $4 trillion in industrial GDP, making it the largest manufacturing country, with the world's largest output of cars, mobile phones, computers, washing machines, air conditioners, color TV sets, refrigerators, steel and other products.
On the other hand, the industries undertaken by Vietnam are basically labor-intensive industries with little technical content, and although it has had a certain impact on the inland provinces that want to undertake the transfer of low-end manufacturing along the coast, Vietnam has neither high-end manufacturing nor heavy industry. what's more, it is impossible to establish a full-industry chain network like China. For China, which wants industrial upgrading, it is more about industrial complementarity.
What's more, Vietnam's demographic and tax advantages cannot be sustained forever. As more and more foreign businessmen invest and build factories in VietnamLocallabour forceAnd rent, etc.CostAre improving rapidly.. A survey shows that the average monthly salary of factory workers in Vietnam this year ranges from 2200 yuan to 2400 yuan, and enterprises generally expect that Vietnam's labor costs will be the same as those in China in seven years' time. In terms of rent, the rent of industrial parks in the provinces around Ho Chi Minh City has risen several times from $30 per acre in 2015 to $100 today.
The tariff preferences of Europe and the United States to Vietnam also face the risk of being cancelled, after all, the decision is in the hands of others. As early as 2020, the United States launched a 301 investigation into Vietnam's timber and exchange rate-related policies, which shows that it is a matter of minutes to impose tariff sanctions on Vietnam.
The current situation is that Vietnam's population and rental costs are rising, and once the tariff advantage is lost, then Vietnam's manufacturing industry will face great challenges.
03 the next Thailand?
Although Vietnam cannot replace China as the new "factory of the world", there is hope that it will become the next Thailand.
As a neighbor of China, Vietnam, following the pace of China, issued the Investment Law in 2006, abolished many previous restrictions on foreign investors, and then joined the WTO, formally integrated into the global trading system, with rapid foreign trade and rapid economic growth.
In the 20 years from 2000 to 2020, Vietnam's GDP increased more than eightfold. Per capita GDP also soared from $96 in 1990 to around $3700 last year.
According to Nguyen Chun Phu's goal, Vietnam wants to become a high-income country with a per capita income of US $18000 by 2030 and a prosperous and stable developed country by 2045.
This goal is not ambitious, butIn just a few decades, it is almost impossible for Vietnam to become a developed country like Japan and South Korea. But with luck, it is possible to reach the level of Thailand.There are also Vietnamese economists who regard Thailand as their development goal.
Vietnam and Thailand are both major rice exporters in the world, and there are also a lot of tropical fruits, so they can continue to earn foreign exchange through agricultural exports. In terms of the tertiary industry, Vietnam has a long and narrow coastline and good winter tourism resources, which can develop tourism like Thailand.
In terms of industry, Vietnam is mainly labor-intensive light industry, which is more homogenized with Thailand and other Southeast Asian countries. When labor costs rise to the level of Thailand, then there is no advantage compared with other Southeast Asian countries, so it is very difficult to continue to move up.
In the long run, Vietnam can learn from South Korea and Japan, choose several leading industries in textile, automobile, electronics and other fields to focus on development, and establish corresponding industrial chains and supporting networks.
But this requires long-term accumulation, and in an increasingly competitive global environment, it is difficult for newcomers Vietnam to succeed.
In addition, in the process of borrowing heavily to develop the economy,The global liquidity crunch caused by the Fed's rate hike is very dangerous.Thailand is a living example. Thailand, which successfully seized the second wave of industrial transfer, was mercilessly harvested in the 1997 Asian financial crisis triggered by the Fed's interest rate hike. Now that the sickle of the Fed raising interest rates has been raised high, it is still a question whether Vietnam, which has a poor family, can withstand it.
IMF and some big Wall Street banks believe that the risk of Fed tightening is using the tightening dollar cycle to pass on to fragile and poor countries.Under the influence of the sharp rise in external debt and the upside-down of foreign exchange reserves, countries with fragile models such as Turkey, Sri Lanka, Vietnam, Brazil and Argentina will face the dilemma of rising financing costs and increasing interest on their debts..
It is undeniable that Vietnam has been working very hard to develop its economy in recent years, and its industrialization and exports have also improved, but it is extremely difficult to complete the counterattack from a poor country to a rich country, and there are many traps. If Vietnam can get away with it, it is still possible to catch up with Thailand.