Vietnam welcomes significant investment from China across diverse manufacturing segments, including textiles, optics, and telecommunications. Increasingly, Chinese investors are keen on electronics and solar manufacturing in Vietnam given affordability, land, and competitive labour costs.
Chinese Enterprises Accelerate Investment in Vietnam
Over the last five years, China has been one of the top five investors in Vietnam. In 9M/2023, it had the second-highest investment in the country at US$2.92 billion, following Singapore with investment of US$3.98 billion.
Figure 1: Number of China newly registered FDI in Vietnam in 2018 – 9M/2023
According to the Ministry of Planning and Investment, in 9M/2023, 102 countries and territories invested in Vietnam. China is the second largest source, with a 14.5% share, increasing by 94.9% year-on-year. In terms of newly registered manufacturing FDI, in 9M/2023, China was the leading country with a 22% share. Singapore followed with a 21% share, and Hong Kong was third with a 17% share.
Figure 2: Newly registered manufacturing FDI by nationality, 9M/2023
Cumulatively, Chinese investors have 4,032 projects with a total registered capital of US$26 billion, placing China sixth of the 144 countries and territories with investments in Vietnam.
China remains Vietnam’s largest trading partner with a 24.6% share of the country’s total trade turnover by the end of September 2023. In 2022, the import and export value between China and Vietnam was US$175.6 billion. In 10M/2023, this reached US$138.9 billion.
Vietnam has been fighting its way up the value chain for years. Events like the US-China Trade War in 2018 and the pandemic in 2020 and 2021 have sped up the diversification and relocation of multinational electronic manufacturers outside of China to Southeast Asia.
Cumulatively, Chinese investors have 4,032 projects with a total registered capital of US$26 billion, placing China sixth of the 144 countries and territories with investments in Viet Nam.
China remains Viet Nam’s largest trading partner with a 24.6% share of the country’s total trade turnover by the end of September 2023. In 2022, the import and export value between China and Viet Nam was US$175.6 billion. In 10M/2023, this reached US$138.9 billion.
Viet Nam has been fighting its way up the value chain for years. Events like the US-China Trade War in 2018 and the pandemic in 2020 and 2021 have sped up the diversification and relocation of multinational electronic manufacturers outside of China to Southeast Asia.
Table 1: Largest China Manufacturing Investment to Viet Nam, 2023
Increasing Demand from Solar Manufacturers
Solar product manufacturing is on the rise in Viet Nam, particularly in northern provinces. Recently, Trina Solar, one of the largest solar panel producers by sales globally, invested in its third factory in Viet Nam in Thai Nguyen. The planned new factory is expected to span a land area of 25 hectares with an investment of US$400 million. Trina Solar has made some of the largest solar manufacturing investments in Viet Nam.
Top Chinese solar companies have been expanding production in Viet Nam in recent years, not only to tap into the Southeast Asian market but to use it as a springboard to enter European and the US markets with greater ease.
Firstly, Viet Nam shares a border with China, facilitating convenient transportation of goods, raw materials, and production lines. Moreover, the northern region of Viet Nam offers geographic proximity to China and competitive industrial land prices compared to the southern region. Viet Nam’s high level of economic integration is noteworthy. To date, Viet Nam has established economic and trade relations with around 224 partners from various countries and regions worldwide. This creates favourable opportunities for Chinese businesses in Viet Nam to expand their market presence. Also, the country boasts an ample workforce, including a skilled labour force, and offers highly competitive labour costs. The Government has introduced tax incentives and a clean energy strategy to attract foreign investors.
Transition of Viet Nam’s Value Chain
Demand from electronics and solar product manufacturers for factories is sound. To meet the requirements of Chinese manufacturers, developers in Viet Nam are improving construction quality. For example, CNCTech Industrial is amongst one of the most active developers with significant investment in six provinces across Viet Nam with 19 industrial parks spanning 5,487 hectares. Among these, Vinh Phuc stands out as the focal point, with 150 hectares of land acquired to date. CNCTech offers tenants a full package of support throughout the investment procedure, including investment application, business registration, construction, fire protection permits, furnishing, electricity system, equipment imports with customs, EPE export license applications, labour recruitment and legal and other administrative support.
Industrial parks nationwide have high occupancy of over 80%, with occupancy in key northern provinces reaching 83% and 91% in key southern provinces. Ready-built factories and warehouses also recorded high occupancy of 83% across the country. Limited vacancies could challenge tenants if they do not have the right entry approach or the support of a qualified advisor.
The industrial property landscape is changing with more institutional players. As manufacturing and logistics mature, products are increasingly diverse such as ready-built factories, warehouses, multilevel facilities, hybrid facilities, temperature-controlled buildings, and built-to-suits. In just five years, occupiers have greater choices and are no longer tied to 50-year land leases as was the norm. This drives heavy competition between investors with more ready-built stock launching in key provinces. To attract the best companies, IP and ready-built developers should focus on value-added services and incentives beyond price and rents such as market entry services, HR and legal support, management services, sustainable initiatives and working with professional industrial real estate agencies.
The Government should continue its investment in infrastructure and upskilling Viet Nam’s labour force to improve productivity and efficiency. Fostering supporting industries, strengthening supply chains, simplifying investment and land use procedures, and embracing digitalisation are all key areas for Viet Nam’s industrial sector.
John Campbell
Head of Industrial Services
Savills Viet Nam
