Why Investing in Vietnam Might Be Beneficial for China?
Vietnam in recent years has become one of Southeast Asia’s most vibrant economies. For China, which is already such a dominant force in global trade and manufacturing, Vietnam offers something special — not just economically but also strategically. Yes, both South Korea and Japan have a convoluted past with ongoing issues but there is an opportunity for pragmatic cooperation by way of investment which can bring you win-win two separate birds. That’s why China has a lot to gain from investing in Vietnam.
1. Resilience and Diversification of Supply Chain:
Supply chain diversification need is now one of the lessons of the COVID-19 pandemic and rising tensions between the United States and China.
Vietnam provides:
China Proximity: Since Vietnam lies south of China, it is easy to integrate logistically.
Low Labor Costs: It is a good location to undertake labor-intensive production since its labor is less expensive than China's coastal region.
Export-led economy: Vietnam has a series of free trade agreements that allow investors to penetrate markets such as the EU, Japan, and CPTPP nations.
Benefit to China:
With investments in Vietnam, Chinese companies can mitigate exposure to tariff threats from Western economies and protect against supply chain breakdowns in the world.
2. Geopolitical Strategic Influence
Economic interdependence can serve as a stabilizing element despite the disagreements between China and Vietnam, particularly in the South China Sea.
Soft Power Extension: China's influence in the region can be increased through investment initiatives, especially in manufacturing and infrastructure.
ASEAN Integration: One of ASEAN's most important members is Vietnam. China can indirectly access regional frameworks and policy coordination through stronger economic connections.
Chinese benefit: By bolstering China's larger "Neighborhood Diplomacy" strategy, economic involvement with Vietnam thwarts attempts by the West and India to limit Chinese influence in the Indo-Pacific.
3. Synergies with the Belt and Road Initiative (BRI)
Vietnam hasn't completely rejected collaboration, but it has been hesitant to fully embrace China's Belt and Road Initiative.
Infrastructure Development: Chinese SOEs are excellent in the fields of logistics, energy, and transportation, all of which Vietnam needs significant investments in.
Cross-border Connectivity: For China's southern provinces and economic connections to the sea, the Kunming-Lao Cai-Hanoi-Haiphong corridor is essential.
Benefit to China: Investments support the completion of key infrastructure routes that support the objectives of the Belt and Road Initiative, boosting regional trade and expanding Chinese logistical reach.
4. Exposure to a Newly Expanding Consumer Market
Vietnam's middle class is expanding rapidly, with over half the country projected to be part of it by 2035. Spending by consumers is spiraling in:
White and electronics goods
Cars and e-bikes
Online and financial-tech shopping
Chinese advantage: Through injecting capital into local manufacturing, retail, and internet platforms, Chinese firms (like Xiaomi, Alibaba, and BYD) can link directly to this growing consumer base without necessarily needing to navigate trade barriers.
5. Industrial Relocation and Vertical Integration
China is moving up the value chain to high-tech manufacturing, with relocation of lower-value industries taking priority.
Textiles, footwear, and electronics assembly: These are increasingly shifting to Vietnam.
Chinese firms can keep control of the value chain by relocating operations without removing R&D and supply management from China.
Chinese benefit: Vietnam is an extension of China's industrial base, and it allows companies to optimize costs without losing ecosystem control.
6. Complementary Economic Models
China and Vietnam, while differently ruled, share some economic models:
Strong central planning with market reform
Focus on infrastructure-led development
Policy innovation and industrial parks
Vietnam's model takes a strong cue from China's success from the 1980s.
Benefit to China: Aligning policies makes it easier for Chinese investors to navigate the regulatory climate, especially in government-to-government (G2G) ventures.
7. Shared Interests in Regional Security
As rivalry between China and the U.S. intensifies, China and Vietnam both share an interest in the preservation of regional stability for development.
Cooperative development in disputed areas: Investment offers channels for dialogue and de-escalation.
Multilateralism: Cooperation within ASEAN, APEC, and RCEP offers commonalities.
Benefit to China: Investment supports mutual interests, dampening the threat of military escalation and promoting a safer regional business environment.
Challenges to Consider
Historical skepticism and Vietnamese nationalism
Vietnam's cautious attitude towards Chinese investments in strategic sectors
Potential backlash if projects are not transparent or lack environmental safeguards
But these can be overcome by strategic partnerships, domestic joint ventures, and corporate diplomacy.
Vietnam is not only a convenient economic partner for China, but also a strategic investment center consistent with long-term regional objectives. By investing in Vietnam, China can:
Secure its supply chains
Enhance geopolitical influence
Access an emerging consumer market
Comply with regional integration efforts
Upgrade Belt and Road connectivity
If well managed, Chinese investment in Vietnam has the potential to be a cornerstone of regional prosperity and stability—not just an issue of profit, but of visionary strategy.
It's time to rethink for Western countries and America, should they invest in China or not?