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Chinese language firms are fuelling virtually one in three new investments in Vietnam, in an indication of how they’ve relocated operations overseas to keep away from Donald Trump’s commerce battle with Beijing.
However this shift is prone to enhance Vietnam’s vulnerability to tariffs as Trump targets international locations which have racked up huge commerce surpluses with the US.
Vietnam has been one of many largest beneficiaries of commerce tensions between the world’s two largest economies. Its surplus with the US reached a report $123.5bn final yr, the third-largest after China and Mexico.
A part of that has been pushed by the exports of firms resembling Apple and Intel, which have moved manufacturing traces from China to Vietnam to unfold provide chain dangers and keep away from punitive tariffs.
However Vietnam can also be more and more getting funding from Chinese language firms, accounting for 28 per cent of recent initiatives final yr, up from 22 per cent in 2023.
“Chinese capital is forced to come to Vietnam, even though it is not cheap any more,” mentioned Meir Tlebalde, chief government of Sunwah Kirin Consulting Vietnam, which advises overseas traders.
She mentioned many Chinese language purchasers had been beneath strain from patrons within the US and Europe to maneuver out of China.
Most Chinese language manufacturing investments in Vietnam had been being made to keep away from US tariffs and safe a special “certificate of origin” for items produced by Chinese language firms, she mentioned.
Nevertheless, Vietnam’s provide chain remains to be extremely reliant on China. “At least half of the raw materials come from China,” mentioned Tlebalde.
Within the first month of 2025, Chinese language firms accounted for 30 per cent of initiatives, in accordance with the newest authorities knowledge. Chinese language investments additionally got here by way of Hong Kong and Singapore, the latter of which was the highest investor in greenback phrases in Vietnam final yr, analysts mentioned.
The surge in Chinese language investments in Vietnam and its dependence on Chinese language uncooked supplies may entice renewed scrutiny from the Trump administration, which has accused Beijing of circumventing tariffs by sending merchandise by means of third international locations.
Vietnam, as with many different international locations, can also be extremely uncovered to Trump’s threats of reciprocal tariffs on US buying and selling companions. He has additionally threatened to levy 25 per cent tariffs on metal imports, which may additionally hit Vietnam, the US’s fifth-biggest provider of the metallic.
Excessive tariffs would have a big effect on Vietnam’s economic system, deterring funding and placing a damper on one of many quickest progress charges on this planet. The US accounts for practically 30 per cent of Vietnam’s exports.
“There are some concerns that the US could see that [increased Chinese investment] as indirect tariff avoidance by Chinese companies, and they could investigate more goods coming from Vietnam,” mentioned Jack Nguyen, chief government of Incorp Vietnam, which advises overseas traders within the nation.
Most Chinese language funding in Vietnam is in meeting and low-to-mid-end manufacturing, from automobiles to photo voltaic panels. China’s strict curbs throughout the Covid-19 pandemic additionally pushed some firms to diversify exterior the nation.
A small share of Chinese language items had been additionally relabelled “Made in Vietnam” with none value-added and rerouted to the US, consultants mentioned, a observe that’s unlawful.
Hanoi had already elevated due diligence on Chinese language merchandise and investments, Nguyen mentioned. “They would not allow Vietnam to be used as a transshipment country to the US at the risk of the US coming down hard on Vietnam.”
Vietnam’s Prime Minister Pham Minh Chinh acknowledged dangers to his nation, telling an viewers in Davos final month that Hanoi was growing “political and economic solutions” to sort out its commerce imbalance.
He added that Vietnam would buy between 50 and 100 planes from Boeing within the subsequent 10 years in addition to different high-tech US tools — and agreed to golf with Trump “all day long” if wanted.
This month, commerce minister Nguyen Hong Dien mentioned Vietnam was prepared to extend agricultural imports from the US and that it could not impose any measures that might limit commerce with the US.
Vietnam can also must step up strain on the rerouting of Chinese language merchandise. Hung Nguyen, a provide chain skilled on the RMIT College Vietnam, mentioned Hanoi may push Chinese language firms to spend money on higher-value manufacturing and tighten native content material necessities to drive them to arrange a provide chain within the nation.
“I anticipate [Vietnam] will use technical barriers to reject some Chinese investments,” he mentioned.
However Nguyen Khac Giang, a visiting fellow at Singapore’s Iseas-Yusof Ishak Institute, mentioned Vietnam must “walk a fine line” between China and the US, its two largest buying and selling companions.
“I would not expect Vietnam to openly push back against Chinese investment,” mentioned Giang.
Extra reporting by Haohsiang Ko in Hong Kong
