Manufacturers want to quit China for Vietnam, but find it impossible
wsj.com
wsj.com
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.
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.
(Ironically a reversal of USA support for China during the sino Vietnam war)
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?
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.
https://www.globalpropertyguide.com/Asia/Vietnam/economic-fr...
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.
Don't judge by the anomalies, judge by the everyday life for regular people.
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.
Sometimes, they kill citizens and then effectively say shit happens.
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.
Perhaps it would have been better in the specific case to first revoke the person's citizenship?
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.
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.
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.
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.
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...
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.
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.
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.
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.
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.
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.
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'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.
It's based in animosity, which is typically economically detrimental: https://en.wikipedia.org/wiki/Economic_discrimination#Animos...
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
Except for US consumers.
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!
This gives China a great place to spend their huge reserves.
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.
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.
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...
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.
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.
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.)
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.
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.
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.
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.
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.
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).
- 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.
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.
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.
I'll give you one hint, the name of that country starts with a C.
China is #4 in FDI flows into Vietnam. Every factory I've been to here is South Korean.
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.
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.
their poor demographics lack of youth due to family planning means labour heavy manufacturing is on the way out...
Vietnam started a long time ago. And it doesn't have to replace China, just part of the manufacturing process.
"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.