My view is that Vietnam can replace a small part of very low-end industries, but it is absolutely impossible to completely replace China.


Many products in life began to be made in Vietnam. For example, we wear Nike sneakers and we drink G7 instant coffee. You may find that more and more products produced in Vietnam enter our lives.


This makes many foreign trade friends in China feel scared and many overseas customers feel happy. They believe that with the gradual loss of China's demographic dividend and the rapid rise of costs, the cost advantage of China's manufacturing industry will decline again and again.


The manufacturing industry in Southeast Asia has begun to flow into the consumer markets all over the world, and China's manufacturing industry will be gradually replaced and marginalized. If laymen say so, it's understandable because they don't know the inside story. However, many foreign traders also hold a pessimistic attitude. I feel confused and puzzled. Are they exaggerating the negative atmosphere about China?


01 where does Vietnam's confidence come from? I think there are several factors worth considering. First, the region borders Yunnan and Guangxi in China, which is conducive to the transfer of China's manufacturing industry. Not only do Vietnamese think so, but many European and American entrepreneurs also have such calculations. Secondly, for the political purpose of suppressing "made in China", European and American countries will inevitably curb China's production capacity and transfer it to a certain extent. Therefore, Vietnam, India, Cambodia and Bangladesh around China have become priority options.


Third, Vietnam has released a large number of rural labor forces, and the demographic dividend has brought cost advantages. According to Vietnam online, the average monthly salary in Vietnam today is about $150, much lower than that in China today and perhaps the same as that in China in the 1990s. Fourth, it has undertaken a large amount of manufacturing capacity transferred from China, and many European, American, Japanese and Korean companies have begun to deploy in Vietnam. For example, Nike has gradually transferred orders from Guangdong, Fujian, Zhejiang and Jiangsu to Vietnam. Now Vietnam has produced more Nike shoes than Chinese mainland.

第三,越南释放了大量农村劳动力,人口红利带来了成本优势。根据越南在线(Vietnam Online)的数据,如今越南的平均月薪约为150美元,远低于今天的中国,或许与20世纪90年代的中国持平。第四,它承担了大量从中国转移来的制造能力,许多欧洲、美国、日本和韩国公司已经开始在越南部署。例如,耐克过去已逐渐将广东、福建、浙江和江苏的订单转移到越南,如今,越南生产的耐克鞋数量已超过中国大陆。

Fifth, Western companies led by the United States directly invest and build factories in Vietnam, which are managed and operated by the American team, employ Vietnamese workers, adopt western advanced management concepts, and create profits in combination with Vietnam's local low-cost and preferential policies. In the view of the Vietnamese government, this is not only the success of attracting investment, but also the performance of foreign capital's emphasis on long-term development in Vietnam.


Sixth, Vietnam's GDP growth over the past decade has been maintained at about 6% – 7%. The economic data are very eye-catching. It is the only country in the world that can maintain rapid growth (the other is China). The younger population structure makes the Vietnamese people full of confidence and can support Vietnam to maintain long-term rapid growth.


For some time, Vietnam became a blessing in the eyes of international producers. The Vietnamese government has made a great commitment to a low tax environment and a good labor market.


However, it is regrettable that Vietnam is simply unable to undertake China's manufacturing industry. There are many problems that are difficult to solve in the short term, such as economies of scale, industrial chain, technology accumulation, market depth and so on.


The transfer path of manufacturing industry is the result of globalization and industrial division of labor. From an economic perspective, comparative advantage has played a role. After the Second World War, the manufacturing industry in the United States and Western Europe was unprecedentedly strong. However, due to cost factors, European and American countries need cheaper production capacity. They need to harvest the markets of developing countries and transfer low-end manufacturing industries with low profits and high pollution to development.


Among them, it has experienced three stages. In the first stage, Japan took over the manufacturing industry of the United States and Western Europe; In the second stage, the four Asian dragons took over Japan's manufacturing industry; In the third stage, China took over the manufacturing industry of the four Asian dragons.


Today, China is far stronger than Japan and the four Asian dragons. We can't find the next target in terms of population, national strength, capital, scale, fine division of labor, market depth, technology accumulation, industrial chain and so on. Let me ask, when Wal Mart needs to urgently order 600000 pairs of jeans and deliver them within two weeks, who else in the world can do this except China. Today, no one can replace China's manufacturing strength.


On the whole, the world is now highly dependent on Chinese manufacturing. Although Vietnam's business environment has been greatly improved in recent years, its infrastructure is weak and its transportation and logistics are backward. It can't even be compared with China's Yunnan Guizhou Province, let alone the Yangtze River Delta and Pearl River Delta. At least in the short term, Vietnam is not qualified. More than 490 of the world's top 500 enterprises have branches in China.


The disadvantage of the company's ambition to build factories in Vietnam and China is to reduce the cost of building factories in Vietnam and China. But after I went there, I found that it couldn't drive at all. Not to mention that transportation and infrastructure cannot be upgraded temporarily, and the defects of global industrial chain division of labor are still fully exposed in Vietnam.


After all, China has accumulated so many years. Since the 1990s, it has become the factory of the world. This is the struggle in the past 30 years. The industrial chain layout is extensive and detailed, and almost all raw materials, accessories and related outsourcing factories are located in China.


For example, scancom, an American furniture factory I worked with, has set up a factory in Vietnam, which is directly invested and managed by the United States. On the surface, Vietnam's wood quality is very good and the wages of workers are relatively low. The United States believes that it will use modern American management to improve efficiency and maximize profits.


But the reality is that the hardware needed for furniture must be imported from Guangdong, China; Small hardware such as screws and nails need to be imported from Zhejiang, China; Although painting and electroplating can be carried out in Vietnam, one factory is 500 kilometers away from the north and another factory is 600 kilometers away from the south. The cheapest option for cartons, color cards, manuals and labels is still to place orders in Chinese factories and then import them into Vietnam.


Therefore, of the more than 90 related accessories involved in a set of furniture, less than 30% can be used for production and processing in Vietnam, and the remaining 70% must be purchased from China and other Asian countries. China is a core supplier that can not be bypassed.


Due to the limitations of land area, population scale and industrial development, a small country is doomed to be unable to plan the whole industrial chain. Even in Europe, where German manufacturing is so strong, it can only choose a few categories and focus on high-end manufacturing. Most of the supply chain is distributed around the world, and Germany cannot develop the whole industrial chain, but its advantage lies in the close ties within the EU, which enables Germany to purchase parts and some processing links in other European countries.



What about Vietnam? You can only regard yourself as a link in the industrial chain, closely combine with neighboring China and other Asian countries, and jointly complete the fine division of labor. Maybe you can occupy a place in the global market.


The bottleneck of demographic dividend. On the surface, Vietnam is full of vitality. Young people account for almost 60% of the more than 90 million population, which can greatly provide the labor force needed for manufacturing. However, young people in Vietnam are generally not well educated and do not have enough economic strength to develop education and invest in scientific research.


Therefore, low labor cost does not mean high production and management efficiency, and it is difficult to find and cultivate talents. To fully open the situation, it will take a long time to enter the middle and high-end links of the supply chain. Vietnam's demographic dividend, the bottleneck period will come earlier, in other words, the upper limit will be lower. The reason is that the limitations of the industrial chain make the job choices of young people less diversified and rich. Vietnam itself is a small country. Its land area, market depth, industrial structure, infrastructure and transportation facilities will become the upper limit of the overall effect of the demographic dividend.


To sum up, under the premise of increasingly complex international division of labor, many low-end industrial chains are transferring to low-cost countries and regions. This is a general trend. It can not only actively reduce the cost burden of enterprises, but also passively promote the industrial upgrading of developed countries and regions.


I am glad to see some of China's backward production capacity transferred to Vietnam and other Asian countries to gain more advantages and cost freedom. Vietnam just wants to take over China's manufacturing industry and become the factory of the next world. I can say that this is wishful thinking. Even with other South and Southeast Asian countries, it can't do it!


Whenever I hear crazy economists predict that the "world factory" will rise in Vietnam and replace China, I will laugh.


The United States believes that by replicating the TPP of "China miracle" in Vietnam and other Asian countries, they can outwit and stifle China's production. But the fact is far from reality. No country in the world can replace China!