Google, Dell, Amazon, Apple… The list of technology companies -and from other sectors- that are beginning to settle in Vietnam is becoming more extensive. These movements also represent a severe blow to the economy of Chinawhose fame in the last two decades was based on establishing itself as the technological “factory” of the planet. Apparently, that sign is slowly starting to fade. Several factors explain, in principle, the changes: from the restrictive measures due to the COVID-19 pandemic, going through the trade fight with the United States, to the opportunities offered by the Vietnamese government, whose economy is increasingly robust.
It is that in recent years, Hanoi has managed to offer such stable finances and numbers that they managed to position the country among the safest in the world. Southeast Asian. Is that Vietnam It has a solid track record: since 1990 its growth has averaged 6% per year. This increase in the productive level of the country was only interrupted by the coronavirus pandemicalthough that year (2020) his numbers were also positive.
In 2016, The Economist He already warned about the growth of the Asian nation: “Perhaps the biggest factor in Vietnam’s favor is geography. Its border with China, a point of military conflict in the past, is now a competitive advantage. No other country is closer to the manufacturing heartland of southern China, with connections by land and sea. As Chinese wages rise, Vietnam becomes the obvious substitute for companies moving to lower-cost production centers”.
That trend continues to this day. Added to economic stability that makes the possibility of relocation even more attractive. Moody’s Analytics – one of the most important consultancies in the world – listed other factors, especially its comparison with the Chinese regime.
Moody’s projected that it will continue to benefit from investment inflows diverted from political uncertainties in China. It is also the only economy in Pacific Asia which has undergone a significant upward revision of growth forecasts for the GDP. The consultant projects that its GDP growth in 2022 will reach 8.5%, the highest among the other countries in the region.
“The slow reopening of the Vietnamese economy at the beginning of the year has turned into a rapid improvement in industrial production and export trade, supported by continued foreign direct investment. Policy uncertainty in China is driving investment toward Vietnam and other Southeast Asian countries”, the economists pointed out in a report on August 15.
The report was pessimistic about the Chinese regime, fueling expectations about a more predictable economy like Vietnam’s. According to Moody’s, prospects for China and Hong Kong have dimmed the most. anticipate that the China’s real GDP growth by 2022 reaches only 3.4%, below the July estimate of 4.3%. On the other hand, it is expected that the Hong Kong GDP by 2022 enters negative territory following quarterly declines in GDP in the first and fourth quarters of 2021, followed by an even deeper quarterly decline of 2% in the first quarter of 2022 as a result of international travel restrictions and the closure of the border with China.
“The continuation of local Covid-19 related restrictions until mid-August added to this uncertainty, although current restrictions are limited and located inland, away from major manufacturing and shipping hubs.”, said the economists of the economy of Hong Kong.
Differences with China
the journalist Shuli Rena columnist on Asian affairs for Bloomberg, recently wrote an article in which he highlighted the differences currently seen between Vietnam Y China, the two largest communist countries. “There is a key difference. As China sinks deeper into an economic hole, the Communist Party of Vietnam seems capable of correcting its mistakes”.
His approach to the pandemic Covid-19 is an excellent example. Initially, both countries wanted to develop their own vaccines, as a matter of national pride and strategic interest. When Nanocovaxof Vietnam, began phase 3 clinical trials in June 2021, the country was far behind in terms of vaccination, as only 1.5% of its 98 million inhabitants had received at least one injection. Hanoi then also had a zero tolerance approach. Like Shanghai, the commercial center of Ho Chi Minh City suffered a four-month lockout last summer. The army was deployed amid food shortages and deaths.
Perhaps reeling from chaos, Vietnam put aside its pride, approved vaccines from around the world and, in the fall of 2021, injected its population with doses from AstraZeneca Plc, Pfizer Inc. and even China’s Sinopharm.. It accepted donations from foreign governments, through the World Health Organization’s Covax facilities, and encouraged companies such as Samsung Electronics Co. to find and pay for vaccines. With more effective vaccines to protect its population, Vietnam was able to fully reopen its border in mid-March. ChinaInstead, it continues to refuse to import the more effective mRNA vaccines and continues to resort to city closures.
Consequently, the economic contrast between the two countries could not be more acute.explained Shuli Ren.
The analyst continued: In recent months, the Chinese have debated much about whether Vietnam will displace your country as the main manufacturing center. Anxiety has also been generated by the exodus of global companies. Vietnam it aims for 7% growth this year, while Chinese leaders have acknowledged that the country will fall short of its 5.5% target.
The economic growth of a country can begin with the increase in exports, but it does not end there. Vietnam grew 7.7% in the second quarter. The manufacturing sector accounted for 2.4 percentage points, but services, including retail sales and tourism, contributed 2.9 percentage points to global growth. With the reopening of the economy, Vietnamese people traveled to resort islands like Phu Quoc with a vengeance, spending money on hotels and restaurants. In China, by contrast, travelers to the southern island of Hainan were stuck when the tourist area went into a hard lockdown following a local Covid outbreak. Surely, that experience would mark some consumers.
The Economist The labor force of both countries is also highlighted in its report. “A relatively young population contributes to the attractiveness of Vietnam. While China’s median age is 36, Vietnam’s is 30.7.. Its urban workforce has plenty of room to grow. Seven out of ten Vietnamese live in the countryside, about the same as in India, and compared to just 44% in China. The rural labor pool should help cushion wage pressures, giving Vietnam time to build labor-intensive industries, a necessity for a nation of nearly 100 million people.”
The economic growth of Vietnam accelerated more than expected in the second quarter, thanks to the recovery of exports and the manufacturing industry that helped offset the risks of the pandemic and the increase in oil prices resulting from the Russian invasion of Ukraine. The economy also benefited from a fiscal stimulus of about 15,000 million dollars and of one looser monetary policy by the State Bank of Vietnam (SBV).
According to Viet Nam Briefing, investment capital made by foreign projects in the first six months of 2022 reached the highest increase since the beginning of the year. “This shows that companies are constantly recovering, maintaining and expanding production and business activities”. “There were 84 countries that invested in Vietnam in the first six months of 2022″, according to that medium. “Among them, Singapore led with a total investment capital of more than US$4.1 billion, accounting for 29.5% of the total investment capital.”
(With information from Asian Nikkei, Bloomberg, Viet Nam Briefing Y The Economist).-
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