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Manufacturers want to quit China for Vietnam, but find it impossible (wsj.com)
148 points by chmaynard 62 days ago | hide | past | web | favorite | 91 comments



This tariff situation is quickly becoming an amazing opportunity for developing countries. The labor shortages being talked about can only be resolved through higher wages, which means that the people at the bottom will get a cut of the new money. In the end the world will be a lot richer and the money will be in the hands of relatively livable countries like Vietnam. (The Vietnamese government is actually pretty good in terms of freedoms.)

It's also politically preferable for the US to depend on a hundred small countries instead of one big competitor. It may also help cushion the next global recession, as each of these international markets will be less correlated with each other than one company in China is with another company in China.

Chinese companies are very tightly integrated with the government's balance sheets, meaning that you can't diversify within China. If one company goes under that means the subsidies ran out, and that means all the other subsidies are running out, which means the economy is toast.


Which would be the case if the tariffs were China-only, but the current presidential administration is enacting tariffs on many other countries, like Mexico, Brazil, and S Korea.

Also, the upcoming Regional Comprehensive Economic Partnership (RCEP) meeting in November could be used by China to unify most of APAC against the U.S. The U.S. TPP was a blocking move to prevent the RCEP, which in it's current form covers half the world's economy (India, China, and others).

Negotiations for RCEP have been slow but with the U.S. now burning trade bridges with it's partners, we're probably going to see something interesting happen in November.


I've never understood how Asian regional free trade agreements and China providing loans to developing countries is really a threat to the west.

Why exactly should the World Bank and the US/Europe be the only top players in the game again?

Has all the strings attached to that help really made the world a better place?

As far as I'm concerned extreme poverty or simply poverty is enough of a goal to target. Attempting to forcefully push country's local politics and governance forward without solving the basic problems of quality of life and all of the luxuries that allow people to focus on less local problems affecting their lives directly, like what they are going to eat next, freeing people up to focus on government and community. That seems like an essential first step.

Otherwise youre just mining the same small group of influential people already in those countries and expecting different outcomes. Not changing leadership or reducing corruption organically through education and the empowerment an influential middle class brings to politics.


> I've never understood how Asian regional free trade agreements and China providing loans to developing countries is really a threat to the west.

It’s a threat from the US perspective, in the US national interest. Currently, the US is the top dog internationally, both economically and politically. As China increases its influence especially in the Asia and Africa region via economic investment and, potentially, demonstration of military prowess, it necessarily means US influence in said region decreases. This decrease in soft power of US means it is more difficult for the US to push for US-friendly policy in said region/country, which is detrimental to the US national interest.


Precisely. U.S. imperialism is based on smart power, a combination of soft (aid packages, trade, etc.) and hard (military) power. The RCEP creates barriers and increases competition for U.S. imperialism, hindering it's soft power capabilities in APAC to negotiate trade deals. The sheer size of it would help propel both India and China economically - if it moves forward that is.


What is beneficial to US might not be beneficial to anybody else (meaning >90% of the world). If I take things to the extreme, it would probably be beneficial for US security and economy to have rest of the world as slaves. Not so much for us.

Previous US governments seemed to have more moral constraints in this regard compared to current one (with great power comes great responsibility and all that). Interesting times we have. I for one root for China despite all its flaws - the world would benefit from counter-balance in power since US is less and less a good moral leader it once used to be.

Plus when we compare outward aggressiveness of these 2 states, US very clearly loses. Fearmongering about China is just empty talk when simple historical facts about unjust invasions of sovereign states are compared. You know, the actually important criteria for common folks out there. Compared to that, the debate whether its better if NSA reads my emails compared to Chinese is a bit pointless.


I agree with you on the fact that what’s beneficial to the US is not necessarily beneficial to other nations. And I agree with you that the current US president is less restraint than previous administrations.

This is probably going to be controversial, but I personally think the US is relatively restrained in its meddling in other nation’s domestic politics given its power and influence. Every nation has its sphere of influence, and they use it for their national interest as needed. In the case of China, it has been building up its military presence in the South China Sea and establishing military base in contested islands to extend their territory claim. It remains to be seem how China will act when it is at the similar power level as the US.


China will be a tyrant. How can anyone imagine otherwise, seeing how it currently treats its perceived internal threats?


The only difference between this administration and the prior ones is less phony talk that masked the same agendas that existed for decades.

Not to mention how this is a hyper US centric view of things. EU, Canada, Australia, and various other countries have tried pressuring China and it's a huge global bureaucratic system. The tweets coming out of the executive branch of the US doesn't have much effect on the giant multi national diplomatic machines like the World Bank and UN. People love exaggerating his actual power.

Everyone paying attention has known the west does the human rights and democracy dog and pony show every big political event while the reality of actually changing another countries politics and governance is extremely challenging and almost always comes from within or as a result of their wealth being directly tied to acting morally or in the interest of their western partners.

It rarely happens due to diplomatic pressure or boxing them out of trade deals and giving out loans.

I personally don't see how it helps to say one thing while nothing really changes and looking the other way when cameras are off. Honesty would go farther and these countries aren't dumb, they see through it all too. So what difference does it make?

That said, of course being civil and calculated is more valuable than being brash and blundering through diplomacy, but that doesn't mean they have to all be full of shit just to be "nice". You can still be honest and strong and not come off like an asshole while giving the media a perpetual panic attack, because they take every word literally as if they were all well thought out, completely serious, and have multiple hidden dog whistling layers, when it was just some throw away half joking tweet made at 3am because he likes to pump himself and America up. Most people can tell the difference, plenty pretend not to on purpose, but either way it doesn't help the process and gives fuel to the spin masters.


I think it's a threat to everyone. As much as people, myself included, have problems with American imperialism, just wait until we get a taste of Chinese imperialism with their millions in concentration camps, dictator for life, ethno-state, and social credit system creating a permanent under class. The further they spread their power, the worse it will be.


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> Because China exploits their loans to have leverage over the countries they deal with - there won't be any criticism of the Muslim Gulags or the oppression in Hong Kong from any country that has loans to China.

What developing country getting a loan from China was ever going to change Chinas domestic policy otherwise? If all of the West who does billions in trade can hardly make a dent I doubt its worth reducing trade and capital flow to African, latin America, and South Asian countries as a consequence.


The problem is that the West has looked away all the time with the shit China was doing, even back at Tiananmen Square decades ago.

The West could have made a statement back then and uphold human rights, now I fear it is too late and the only way restoring human rights and democracy is either a mass uprising in China (which is unlikely given that many young Chinese are fed propaganda, and so much of it that even Chinese living outside of China defend the Chinese government's actions) or outright war which is next to impossible to win except if China would be nuked to the ground and a full-scale global nuclear war.

The fact that many Western governments themselves are turning towards authoritarianism or outright fascism doesn't help either, and some of them are actually taking quite a bit of inspiration from the Chinese playbook, e.g. in mass video surveillance.


I'm still not sure what any of this has to do with China helping start an Asian alternative to the World Bank or making free trade deals. Both of those have plenty of positive benefits globally by stabilizing countries and improving the lives of hundreds of millions still left in poverty.

It seems entirely vindictive, without a real end goal, merely because the West (not just America or their current exec branch [1] but the west including Canada, EU, Australia, etc) completely failed to change China's political policy by other diplomatic bullying/force so they are extending it into the global economic system designed to help smaller countries and the extreme poor, attempting to box out China and others participation. Which ultimately has no noticeable affect on China, so there are only losers as a result, the small countries in need of capital and trade.

The West completely messed up the TPP via back room deals and other corporate hand outs which destroyed everyone's trust in its intentions. Which killed off their best counter balance due to their own self destructive anti democratic habits - which again started before Trump and was due to die regardless if Trump won.

1. This isn't just about America nor has the West's policy towards China hardly changed due to words of the US executive branch for 2-3yrs vs reality of the last few decades and the massive multi country beaurcracy that runs the world Bank, UN, and others.

Once Trump is gone people will quickly remember that Obama and whoever comes next faced the same impenetrable wall that sovereignty, economic weight, and significant cultural differences that exist including a well perfected anti western propaganda that they reflexively employ to explain away all the bad things that happen, something dictators from ISIS to Venezuela has utilized as excuse #1 forever, which makes any western good will very difficult to exploit. Not to mention the limits of power that one executive branch has to change policy in other countries (which is a good thing) is significantly overstated.

Even a no strings attached trade reform is a difficult ask for the west. If the US added a bunch of human rights stuff they wouldn't even get in the negotiation room. But apparently people think that will magically change with another US election.

There was a long string of failures attempts to force human rights and democracy on other countries. There's far more bad examples for every good South Korea, Japan, and Taiwan (which are successes that have as much to do with historical trends, local culture, and domestic economic influence than it was pure diplomatic influence towards a western style gov).


> ...but the current presidential administration is enacting tariffs on many other countries...

I'm quite curious to know possible rationals behind that?

To layman like myself, it make absolute no sense, but on some level it got to have a purpose right? even if it's ulterior motive or personal agenda.


That's because the trade war is irrational.

It's based in animosity, which is typically economically detrimental: https://en.wikipedia.org/wiki/Economic_discrimination#Animos...


> The Vietnamese government is actually pretty good in terms of freedoms.

Wait, what? They recently kidnapped an ex-party member in germany. It was 2017 or so. I can't believe that a country which honors you freedom would do something like this.


The freedom here is... weird.

There is much more freedom of speech than in China, or compared to other SEA countries (maybe except for Thailand, but that has a military coup every 2 years in average).

There is no censorship of foreign media, internet is basically free. You can say whatever you want and nobody cares, people complain about party and officials on Facebook constantly.

On the other hand, they keep arresting people for public protests (google “formosa protests vietnam”), for crazy numbers of years (10, 20 years for protesting). And there are rumors censorship of internet is coming - they made a new law just this January that will allow them to censor Facebook or Google unless they host data here and give data about citizens to the government. It is a question how will they proceed; the party is similarly opaque to Chinese party.

All in all though, it’s around better than other countries in region on average or China but worse than Europe, US, or even Taiwan

You can complain about Party, but once you start actually organizing protests, they will come knocking. But since the economy is growing so crazy, people are generally happy.

and of course as a white expat you are put on a pedestal here and a bit untouchable. It’s bad but that’s how it is.


Correction - some websites are blocked - like bbc.co.uk, but I encountered others. But it's easy to circumvent. The freedom in Vietnam is largely based on the fact that the government doesn't have the means to censor and catch all the small fish. So unless you go on a big public protest, you can basically do whatever you want. Officially, the freedoms are very much limited and yes, internet censorship is on the rise.


BBC seems blocked only on some providers. I can connect to bbc.co.uk now, but bbc.com is DNS blocked.


The US assassinates its own citizens without trial occasionally.

Don't judge by the anomalies, judge by the everyday life for regular people.


US police are the 6th leading cause of African American deaths.

I watched an HK detainee get tortured in a hospital in horror, then remembered we kill thousands of unarmed people every couple years without any trial (many of whom are innocent) and 50-60% of victims are either mentally or physically disabled in some way. Many of them get tortured in similar ways if they make it to prison.

In a different framing, the US looks pretty horrible in comparison to China. It's just that we have gotten used to our own brand of stink.


>US police are the 6th leading cause of African American deaths.

No it's not.

https://www.statista.com/statistics/233310/distribution-of-t...

Only 215 black people were killed by police last year.

>https://www.theroot.com/here-s-how-many-people-police-killed...


General apolitical point:

Phrases like "6th leading cause" contain no information.

Is that 5% or 0.01%?

There is no way of knowing, and depends entirely on how deaths are categorized in some unknown underlying classification system.


You don't think Chinese police have brutality incidents?


It's a little bit different when the person had taken up arms against the nation, no?

Should they get a court hearing? Probably. Is that practical, in some cases, if the person could be apprehended. Otherwise it would just be a pony show with a predetermined outcome, making no difference.


https://en.wikipedia.org/wiki/Abdulrahman_al-Awlaki

Sometimes, they kill citizens and then effectively say shit happens.


The US also assassinates non citizens in other countries without trial that generally would not be accepted if other countries did the same in the US.

i.e. China sending a drone and blowing up a US citizens car, killing him and his family, somewhere in the middle of US and just saying that they were terrorists and a threat to China's security; but not not providing any evidence as that is classified.


The right to a fair trial should not depend on whether it is practical.


The thought was - without the individual at the trial with their own legal counsel - is it a fair trail anyway? If it's a military tribunal that rubber-stamps everything - does that improve the process any?

Perhaps it would have been better in the specific case to first revoke the person's citizenship?


My thought was: Either the person is present and represented or there be no trial. This must not depend on whether presence is hard to achieve.

Revoking citizenship or at least leaving persons stateless is not allowed under UN-Charta afaik. Even then, would you blatantly kill (or better, murder) people? That's not rule of law, but rule of jungle. And as uncivilized as it gets.


Specifically, the known cases of this are people which have taken up arms against the nation, and joined a known terrorist organization. Potentially, even killing citizens of their former country.

I don't see a way to capture and try such an individual without having more citizens put in harm's way, or killed too. If the individual is in a training camp that is targeted and happens to be killed as well - I personally don't think anything of it. But that is starkly different than assassinating some individual in their apartment or hotel, or whatever. To me, one is warfare, and the other is murder - I do make that distinction.

Perhaps we must agree to disagree.


They are a one-party communist state and so are not nearly as good as America, but on the economic freedom index they are close to Hong Kong. Not the greatest country but better than some others where every industry is national (not just China).

https://www.globalpropertyguide.com/Asia/Vietnam/economic-fr...


The link you sent talked about changes in economic freedom... but barely made it clear what they are talking about or measuring. Nevermnind if a site dedicated to global property purchases is likely to be an authority on economic freedom. That site does however say where they get their data: the Heritage Foundation's Economic Freedom Index.

So how does that source characterize Vietnam? "Mostly Unfree", 128 in their ranking of countries. And Hong Kong... "Free", 1 in their rankings... though we'll see how well that holds up over the next few years. So not so close to Hong Kong.

Heritage goes on to say...

"Background

The Socialist Republic of Vietnam remains a Communist dictatorship characterized by repression of dissenting political views and the absence of civil liberties. Economic liberalization began in 1986 with doi moi (renovation) reforms to transition to a more industrial and market-based economy. Vietnam joined the World Trade Organization in 2007 and signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in 2018. Vietnam’s economic growth, based on tourism and manufactured exports, was among the world’s fastest during the decade-long tenure of former Prime Minister Nguyen Tan Dung. In 2016, Dung was forced out after losing election as General Secretary of the Communist Party of Vietnam. State-managed economic liberalization continues under the leadership of General Secretary Nguyen Phu Trong."

So while they do say that things are getting better... they aren't exactly calling it Hong Kong just yet.

https://www.heritage.org/index/ranking


I'm currently in the food packaging industry and over the past few years we have been seeing manufacturing move from China to Vietnam and India. Likewise in Europe it’s moving from Poland out to Romania, Greece, and also Turkey. These decisions are largely based on manufacturing costs.


Working in Food industry as well, do you have any web site that specialise in Food Packaging news?


Have a look at a the trade association http://foodservicepackaging.org.uk/ and also https://www.packagingnews.co.uk/ which covers other packaging but there is a fair amount of foodservice items covered.


> It's also politically preferable for the US to depend on a hundred small countries instead of one big competitor

FTA:

The Chinese model of the past 20 years thrived on suppliers being close to each other, making production quicker, less expensive and more efficient. Now, as operations become more fragmented, they are threatening to raise costs, stretch delivery times and expose companies to multiple tax and labor regimes


I hope so. But I think this may only hold if firms think that these tariff disputes will be an ongoing thing, only then will they make capital expenditures in developing countries.


> In the end the world will be a lot richer

Except for US consumers.


Where goes the money for the subsidy come from


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I do. I spend 3 months/year there.

Cops are very corrupt and most people won’t even report traffic accidents. If you are a foreigner/non-vietnamese, many hospitals won’t even treat you. Abject poverty, aside from a couple of big cities.

Some may like it because with a little money, you can get away with anything.


What areas do you recommend?


It could backfire if China sees these smaller countries as a threat and moves to block them. Vietnam borders with China, no doubt they are as dependent on China as, say, Canada is with the US. I could see China saying "hey if you trade with the US, we're putting 20% on your exports to China"


Wouldn't happen. The Vietnamese hate the Chinese more than the Chinese hate the US. It's more likely that the US eventually extends tariffs to other SE Asian countries.

That said, I think the real story is companies preemptively shifting manufacturing out of SE Asia entirely in order to get ahead of the next wave of offshoring.


The fact that they hate each other lends even more credence to my theory - it’s that much easier to put tariffs on them. 25% of their imports and 14% of their exports are with China [1], China could definitely hurt Vietnam if they become too close with the US.

[1] https://en.wikipedia.org/wiki/Economy_of_Vietnam


China would rather not play with fire here, the Vietnamese night invite the USA to establish a naval base or something if pushed too far, especially considering the current South China Sea contests.

(Ironically a reversal of USA support for China during the sino Vietnam war)


I wonder what are the possibilities of that happening? It is sort of the indicator of how much Vietnamese hate China, by settling with US.


It's unlikely. Chinese intervention in Korea and Vietnam was mainly about keeping US troops off of the Chinese boarder. China's invasion of Vietnam was also partially about limiting Soviet influence in that country.


China and Vietnam historically haven't gotten along well anyway.

And I'm not so sure how many Asian nations would go along with that whole situation. Would be a lot of doubling down there by China... and when / if THEY want to offshore some things, where do they go?


My understanding is that China is offshoring a lot of stuff to Africa. Wages are still lower there.


China has been offshoring to SE since years ago too.


Africa like the poster above mentioned.


I'm from the bay area and moved to Vietnam 3 years ago. I'm watching all of this happen in realtime. I've recently completed a 8500km motorbike trip around all of Vietnam, southern Cambodia and Northern Laos.

In the south of Vietnam, HCMC, there is massive growth. Huge amounts of construction. The city is over populated and growing rapidly. Millions of kids work for $200 a month.

In the north of Vietnam, there is many illegal roads being cut through the forests and jungles to ship things from China. I've ridden these same dirt roads on a motorbike and seen the trucks. Did you know that Vietnam is also building a wall between themselves and China?

All over Vietnam, people are making babies in huge numbers. There is a lot of family pressure to do so. They may only have 100m people now, but every single shack and house has 2-3 babies in it. It will be very interesting to see what happens to all these humans over the next 20 years as this country grows at a rapid pace.

Cities in the north like Hai Phong are expanding rapidly. It is a massive port city that does trade with China and elsewhere. There is a road leading to the airport where all the super wealthy old vietnamese guys spend their 'retired' days riding their bicycles. Anyone who thinks Vietnam is poor should see the absurd size of the mansions here. This is where Samsung has their factories. A massive car factory (Vinfast) was recently built here as well.

In Cambodia and Laos, the Chinese are building a trade route directly through the two countries. Literally cutting a huge freeway and railroad from north to south. Buying up all the land and stripping it. Zero concern for the environment. Even cutting holes through mountains. In return, China Power is also building hydro dams, which are causing lakes to dry up and rivers to flood in the wet season. Google 'china Sihanouk' to see what's happening there. My guess is that if you look on a map, this will give China a great water route directly to Africa. Here is an example of the roadway: http://www.xinhuanet.com/english/2019-07/28/c_138264471.htm

I feel like nobody is talking about this, but it is happening. I've seen it first hand. This tariff situation is making huge waves that will affect this whole planet.

Edit: I just noticed the overhead image of the factory complex in Binh Duong. I've been to those same buildings!


I work for a Japanese automation company and we’ve been getting a huge surge in projects in Vietnam. Some things here are definitely exaggerated.

Birth rates in Vietnam are already below the replacement rate and dropping.

Poverty is a colossal problem. People get paid a couple hundred bucks a month at major internationals. Cost of living is massively lower, but downtown apartments for average people (and not mansions for foreigners making average foreign wages) aren’t in a great state. Rather dilapidated, in fact. Streets are sometimes torn up and left wide open while construction is going on, turning on high energy electronics might trigger a localized blackout (had this happen with an AC at a restaurant near Hanoi), and outside urban cores, you’ll see many homes with 4 plain concrete walls and makeshift doors and ceilings. Dirt floors aren’t surprising. Roadside restaurants and cafes are just tents and shops are shoddily built shacks.

That said, Vietnam is full of great people who are hopeful about their future. Progress is evident, but the poverty there is very real and the improvements aren’t equally distributed.


The amount of wealth here is absolute bonkers massive. Nobody realizes it. Sure there is a majority population living in shacks by the side of the road, but there is a huge huge huge number of people (and growing) in big houses and driving fancy cars. Even some of those shacks are owned by really wealthy people. They just haven't learned to show it off and they don't care about upgrading.

I've seen it all, really. I've stayed in the fanciest hotels and the only place in the smallest village. I've been in such remote places that you don't see a single foreigner for days on end. What you describe is everywhere here. But fact is, you can't drive 100m anywhere in this country without seeing a house/shack with a baby (or ten) in front of it.

The issues you point out about infrastructure is simply that the govt doesn't care about those things. The rich get richer and the poorer get poorer. I don't know of any other society that revolves around 'me me me me' as much as this one.


> All over Vietnam, people are making babies in huge numbers. There is a lot of family pressure to do so. They may only have 100m people now, but every single shack and house has 2-3 babies in it. It will be very interesting to see what happens to all these humans over the next 20 years as this country grows at a rapid pace.

This statement isn't really supported by the population data. Vietnam's population is projected to peak in 2055, https://www.populationpyramid.net/viet-nam/2017/ . Thats about 20-25 years out from China's peak, but still nothing like the absolute population explosion predicted for Africa.


You really believe any numbers coming out of Vietnam? Anything public is supplied by the govt.


In don't understand your incredulity. If anything, any government official would have an incentive to show more people and growth than less.


If you've lived in Vietnam, you'd understand. The govt here does not act with the same logic that you (or I) may have.

For example, here is an English translated news website, that is run by the govt. Recently, they ran this story...

https://tuoitrenews.vn/news/education/20190812/in-vietnam-mi...

One choice quote:

"Another Ho Chi Minh City citizen named Hai set a strict weekly timetable for his daughter to study computing, chess, different forms of art and English out of his own belief that children best develop their ability between ages three and six. As a result, the poor girl suffered from physical symptoms of stress and slight autism, prompting his family to consult a psychiatrist for her special treatment."

Apparently, "study computing, chess, different forms of art and English" causes slight autism in children.

I see you're using a throwaway account...


Your response is a complete non-sequitur. It has absolutely nothing to do with why the government would falsely say population growth is smaller than it actually is.


My response is spot on, it is just that it apparently went over your head. My assertion is that the govt of Vietnam has no clue what their population growth actually is. They throw numbers out in the wind, like they toss out theories that teaching kids art and english, causes autism.


Once u have used all all your resources - what else do u do? Enter a new market, under the guise of alturism, give that country cheap credit... and soon enough you have a new colony!


That is exactly what is happening. Even worse is that Cambodia is based on USD. They have their own currency, but it is conveniently 4000:1USD, which means it is easy to get back quarters in change. All the gas stations, markets, shops, etc... all either price things in USD or accept USD.

This gives China a great place to spend their huge reserves.


The Chinese funded development projects in Laos and Cambodia have been going on for a decade, they predate and have nothing to do with US tariffs.

Because of a fragmented and underdeveloped road system it's hard to transport goods by land between China and Southeast Asia today, that's the main Chinese motive here. (Yes, that also includes gaining better access to the Andaman Sea, which simplifies shipping to India, Africa and the Middle East.)


To be clear, I'm not saying that these projects started because of the tariffs. It is clear from the progress I've seen first hand, that they have been going on for a long time now... and will continue for a long time. The scale of all of this is utterly massive.

What is sad though is that the Chinese are basically taking over two more SE Asian countries and nobody is doing anything about it. Vietnam and Thailand are strong enough to hold onto things, but Laos and Cambodia are not. Every single person I talked to that was local was not happy about it at all.

What was explained to me is that they move their families in for these huge construction projects, and then buy up all the surrounding land. Most of the 'for sale' signs in Laos are written in Chinese.


I haven’t followed China’s expansion into Vietnam as closely as I should’ve. Do you have any articles I can read on the above, or good twitter accounts to follow on the topic?


I really wish there was more news on this matter, but this communist country controls all the news and makes things look happy.

Laos and Cambodia... just append 'china' to those two and google it. Tons of articles.

The rest, you just have to experience first hand to see it directly. It is simply amazing how much (de)(con)struction is going on in these countries.


Currently opening a nontrivial manufacturing facility in China. I've been flying to Vietnam at least once a month for the last 3 months. There are definitely people moving production there, eg. I know one guy for a German group moving factories from China to south Vietnam. We had a chat, and it turns out we're getting cheaper industrial facility leasing here in Zhuhai than they get outside of Ho Chi Minh City. Additionally, we have immediate access to the world's largest industrial supply chain, are only 1 hour from Hong Kong, Macau, Shenzhen, etc. and ~200 million people. Marginally higher cost of living, but it's not a bad deal. Less crazy motorcycle road deaths and more nature here. IMHO Vietnam's big draw versus China is cross-border transactional banking - that stuff's a hassle here. On balance we'll stay put, thanks.


Same for quite a few of our clients. Many companies were asking us for the "Vietnam option" lately, and are surprised when manufacturing in Vietnam comes out more expensive than in China even with tariffs, and usually results in them moving from a Chinese factory in China to Chinese factory in Vietnam that will still be ran by Chinese engineers, Chinese know-how and use Chinese parts.

The thing is that labour is not a big part of manufacturing costs even even for fairly low value goods, and are truly microscopic for higher value electronics. 30 years of Chinese manufacturing already drove out nearly all labour intensive processes out for production of light industry goods.

Chinese companies have moved to heavily mechanised manufacturing quite long ago. Unless somebody can master custom tooling making as well as Chinese companies, they are not going to catch up.


1) For anyone wondering, yes, many of these companies would have the same (or worse) problems if they tried to manufacture in the US. Our domestic supply chains for a lot of industries have dried up (or never developed). US factories also usually have higher minimum quantities and take much longer to tool up.

2) I'm surprised the article didn't mention Africa at all. A lot of Chinese industrialists are investing in Africa, and I suspect that Chinese-style supply chains have a good chance of developing there. If I was looking for a country to for long-term manufacturing strategies right now, I'd be taking a hard look at African countries.


Our domestic supply chains for a lot of industries have dried up (or never developed).

You make it sound like supply chains are permanent, immutable things that can't be created and dismantled at will. It happens all the time.

Yes, there are countries where an existing supply chain is an advantage. But those supply chains weren't always there. They were created when manufacturing demand arrived. The same thing can happen in the United States, Canada, Europe, Brazil, or pretty much any other company.

It's happened before. It'll happen again.

If I was looking for a country to for long-term manufacturing strategies right now, I'd be taking a hard look at African countries.

Agreed. I read/heard somewhere the notion that Africa is tired of making plastic shoes for China, and wants to start moving toward electronics. Considering the labor availability, sea access, and mineral wealth available, I could see that happening.


The "natural" distribution of manufacturing capacity roughly mirrors the population distribution, and Africa is definitely under-provisioned in this respect.

Respect for property rights and political stability is definitely a downside, though. The first industrialists that manage to build out after the last land war or socio-political upheaval are going to get some really nice returns, though.


The underdevelopment of Africa is/was a deliberate decision of the west that China is undoing.

Smart investors realize China/India's future economic status depends on being able to offset loss of western demand/trade with direct trade with African markets.

This is generally better for the whole planet but not if you have a "zero-sum game" mentality (seems more common in the West than East).


The decisions made by roughly 1800 C.E. industrialists to concentrate development in Northern Europe and the United States can be made on a purely geographic basis. African rivers are generally not navigable to the sea, and to this day the cheapest way of transporting goods is to barge it down the river. The US, on the other hand, has the most extensive network of navigable rivers, with the Mississippi and the connections made to various smaller rivers on the Eastern Seaboard via Chicago, the Great Lakes, and the Hudson.


The problem there is the plural in "countries": there's no obvious one place to invest, and cross-border trade is limited by borders, tariffs and terrible infrastructure.

- South Africa is the richest/most advanced on most metrics, but it's also wracked by crime and labor unrest, and set for continuing major political unrest.

- Nigeria is huge and growing, but corrupt to the point of making legitimate business near-impossible.

- Ethiopia is run by a Communist junta whose commitment to reform is questionable at best.

- Rwanda likes to think they're the next Singapore, but they're tiny, landlocked and in a really bad neighborhood.


Nigeria is corrupt but over the past few years, the country has seen a lot investments from Chinese industrialist. Usually small and medium sized one trying to get ahead of the curve. I believe the Chinese can deal with the local corruption in Nigeria. Maybe even thrive in it in the short term


A big problem no-one seems to talk about is 'consistency'. This is undervalued variable to capital intensive business.

All these supply and other issues are readily solvable with time/money but why would you when you don't know if these tariffs will double tomorrow, go away or stay as is for the next 6 years. Who will invest huge capital when a political whim seems likely to change the landscape at any point.


Low tech manufacturing isn't the only thing they're exporting.

Japanese IT firms have been training offshore dev teams in Vietnam/Myanmar for ages and sometimes on-shoring those entire devs team back into Japan.

Some of the larger companies even recruit directly in Vietnam.


Who is starting, building these factories in Vietnam? Who is lending for capital projects and providing industrial expertise to local enterprises.

I'll give you one hint, the name of that country starts with a C.


Actually it doesn't start with C.

China is #4 in FDI flows into Vietnam. Every factory I've been to here is South Korean.


Not even the US can match up with China. In terms of manufacturing China is the leader both in cost and tech.


You're joking, right? They only recently figured out how to make a proper ball-point pen.


I live in Vietnam, people here say Trump’s Chinese tariffs have built many people’s new houses.


China, I expect has a bigger picture view. Our small brain framing "Move Manufacturing Good", doesn't play out when you realize China is an Asian power, not just an isolated country.

China's economy benefits from most business that enters the Asian continent, either directly or indirectly, and this "economic proximity" benefit only increases as they develop infrastructure (domestically and internationally) that streamlines trade.


It took China almost 30 years to cultivate economic development zones into the logistics chain to build the first iPhone. That kind of development can't be replicated in a few years, is likely out of reach for smaller nations (read anyone except India) or viable in a geographically distributed fashion. The problem isn't just moving factories but have a geographically centralized logistics chain where thousands of components are within hours of each other, supported by millions of specialized high skill labor, preferably with similar language proficiency, where new production can be rapidly iterated to meet market demands. A "small" country with 100 million people are not going train a large proportion off their entire population to fill football fields with tooling engineers and other specialists. It's just not demographically in their cards. And it's that level of centralized scale that enables China to manufacture high end electronics in the timescales that modern business cycles require.

That's why all the outsourced electronics production so far are low end assembly in countries adjacent to China where components made in China (other than very high end IC) can be quickly shipped to them have locals can be trained to assemble processes that has been matured and figured out in China. If all Chinese manufacturing magically shifted across ASEAN countries, I don't think there would be the collective capability to organize logistically to produce and iterate a new annual Apple product launch - the entire Tim Cook screw anecdote. The nature of manufacturing has changed. Maybe India can replicate that, they are not starting from zero, but I don't know if Indian democracy can make the extremely unpopular changes Chinese state directed capitalism / SEZ went through. This isn't an issue that can be solved by funneling money / FDI, these things take much longer time than a few years and still can't replicate the advantages of Chinese scale on things where scale matters. There's a qualitative difference in different governance models ability to execute policy and realize capabilities. Distributing Chinese manufacturing among bunch of competing countries with inevitably expensive and inefficient physical and regulatory interconnects just won't produce the same capabilities.

Even if we ignore the fact that countries like Vietnam are reaching infrastructure and labour limits, i.e. they literally at land, road, port, worker capacity which will optimistically take decades to cultivate - generations in terms of expertise that can't be rushed. Or that a lot of the factories that moved out of China are Chinese owned so money and control is still tied to CPC. Or China might undercut ASEAN by setting up parallel manufacturing in Chinese influenced Africa. There's still the matter of automation. Shorterm, China is targeting to increase automation from 68 industrial robots per 10,000 employees (14th in the world) to 150/10,000 employees (9th). For reference, top4 is Korea 631 /Singapore 488 / Germany 309 / Japan 303. China is not stopping at 150 long term, their poor demographics lack of youth due to family planning means labour heavy manufacturing is on the way out, but automation will potentially enable China to retain all their manufacturing advantages in terms of logistics and expertise in long run. And once China learns to make advanced integrated circuits and airplane engines, maybe software, they'll more or less have no western dependencies.


I agree with most what you analyzed. However this is somewhat debatable,

   their poor demographics lack of youth due to family planning means labour heavy manufacturing is on the way out...
I am not sure if you are aware that the family planning policy (aka 1-child policy) has already been lifted years ago. The declining birth rate has to do with the young urban population don't want to have offsprings as much as their parents (social-economical changes, education cost etc.)


I'm aware, lifting restrictions doesn't mean increasingly urbanized population will have 2+ children. Chinese women are marrying and starting families late, if at all. Or that new generations will want to work in factories vs air conditioned offices as China pivots towards service driven growth and internal consumption. And as wages grow it becomes infeasible to compete on labour with less developed countries. Automation means most manufacturing doesn't have to leave China for the same reasons why manufacturing never left the US. It just won't be done by people anymore.


> That kind of development can't be replicated in a few years, is likely out of reach for smaller nations (read anyone except India) or viable in a geographically distributed fashion.

Vietnam started a long time ago. And it doesn't have to replace China, just part of the manufacturing process.


This article is about how replacing part of the process is not enough (Edit: for global companies with complex supply chain demands) - the whole is greater than sum of its parts. It might make shortterm sense under the tariffs restrictions which will likely extend into Trumps potential second term, but there is still reliance on Chinese manufacturing logistics, hence China+1. Some of the +1 are economically viable regardless of tariffs due to raising Chinese labour costs, some are ostensibly fit only for short term tariff-engineering.


Can someone post the full article, as I don't have a WSJ account anymore. Thanks.


Gosh, what a click-bait title. I guess this is a politically biased article, trying to attack Trump. It's not that I like the tariff nor the fight b/w the countries, but it's just that the title is straight wrong.

"China Exodus" has been a thing for almost a decade, meaning that there has been good reasons to leave China other than that little tariff thingy. Rising labour costs, ever-increasing regulations, unexplained government actions, a large number of Chinese (copycat) competitors, government-backed industrial espionage, corruption, lack of justice, etc. It has been like this since mid 2000s, and many global corporations have either already moved their critical production lines or set up backups outside of China.

Quitting is impossible? Nope. Totally possible and many have already done that since years ago. The actual problem is small businesses who can't afford to build new suitable production lines in a hurry. China is indeed the best factory right now, since it's almost a grab-and-go. But that doesn't mean it's going to be the best for everyone nor forever.




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