More Chinese manufacturers are looking to Vietnam as a production base to avoid US tariffs, an insight based on trends in demand for the Southeast Asian nations industrial estates.
One of the top Vietnamese provider of such estates, said it expects Chinese companies to account for as much as half of its land sale contracts both this year and next, up from about 12 per cent in 2018, Bloomberg reported.
“People are moving some production,” head of the firm’s industrial-development unit said.
“It will be a significant impact for Vietnam. A drop of water for China can be a flood for us, because of the different size of the economies,” he added.
Not only Vietnam, Thailand has rolled out incentives including tax breaks to woo manufacturers seeking to skirt the tariffs the US and China have imposed on each other. Thai officials have said companies including Sony, Sharp and Harley-Davidson are moving some manufacturing to the country.
But recent data suggests rival Vietnam has pulled ahead in the race to lure producers.
For instance, more than three times as many companies are planning to relocate or divert production from China to Vietnam than to Thailand, according to research by Nomura Holdings Inc.
At the same time, the value of net foreign-direct investment applications to Thailand from Chinese firms is surging. It rose five-fold in the first half of 2019 compared with a year earlier, data from Thailand’s Board of Investment shows.
Chinese and Hong Kong applications combined were worth about $1 billion, second in value only to Japan, whose firms have long manufactured in Thailand.
WHA Corp., the top Thai provider of such estates expects to add six industrial parks to its current roster of ten in Thailand and has begun selling space in its estate in Vietnam.
The head of the firm’s industrial-development unit doesn’t see Thailand and Vietnam as competitors, saying that “each has strengths and weaknesses.” It takes a long time to set up plants in Vietnam, while Thailand has a labour shortage, he said.