China, India and Vietnam are talking about the world’s growth story
From an economic point of view, should China be pissed off by neighboring Vietnam? Well, Vietnam today reminds me of the developing countries of yesteryear, when their economies were just beginning to grow at a noticeable rate. Its labor-intensive industries like textiles, processing, and manufacturing are booming, fueled by abundant and inexpensive labor.
This has led many to wonder whether the Southeast Asian nation will sooner or later affect China’s position in the global industrial chain.
No, I would say. Close competition and complementarity characterize the dynamic between the two neighbours. From a competitive point of view, the pressures they face from each other are asymmetrical.
China has a mature cross-border e-commerce industry, complete industrial chain, agglomeration advantages, innovation vitality, well-developed logistics and supporting systems.
In terms of complementarity, the export structures of the two countries are different and their supply chains are interdependent. For example, when China fought the COVID-19 epidemic in 2020, the supply chains of many industries in Vietnam also came to a halt.
Direct investment and industrial transfer from China to Vietnam have strengthened trade ties between China and Vietnam, resulting in an international division of labor. Part of China’s surplus with European countries and the United States turned into China’s surplus with Vietnam.
In a sense, Vietnam’s growth is an extension of China’s economic growth. The industrial chains of the two countries are tightly integrated. As a neighbor, a developed Vietnam is more beneficial to China than an underdeveloped economy. China need not worry too much about the challenges posed by the rise of Vietnamese manufacturing industries.
For example, Luthai Textile Co Ltd, based in Shandong Province, which operates more than 40 factories and regional branches in countries including the United States, Italy and Japan, announced earlier this year that it would invest 210 million dollars to build a manufacturing base to make woven and knitted products in Tay Ninh province, Vietnam. The new plant is intended to supply local garment and textile businesses, another step to further expand its market presence after the regional Comprehensive Economic Partnership comes into force on January 1.
In this context, India should be the hot topic. Among China’s neighbors, India has a competitive labor source, a vast hinterland, an increasingly complete electronics industrial chain and a highly developed computer industry. . Its human resources would have an advantage in terms of English skills, comparable to HR in Europe and the United States. India may well have the potential to become not only the world’s next factory, but also a challenger to China.
In the long term, India will seek a higher rate of economic growth than many countries in the Asia-Pacific region. When its economy reaches half the size of China, it will likely have a substantial impact on China. Even if Vietnam’s substitution effect on China is larger in the short term, India’s effect in a similar context will be larger in the longer term.
Constrained by a limited local market, Vietnam plays more of a role as a processing and transshipment hub in the global electronics industrial chain, and its products are exported to North America, Europe and others. regions. The reason why India can attract a relatively more complete electronic industrial chain is due to the tariff adjustment and its large local market. A large number of electronic products made in India can be sold directly in the country, leaving less room for exports.
To cope with these factors, China has already begun to promote high-quality development on its original industrial path and implement the dual-circulation development paradigm that enables domestic and foreign markets to strengthen each other.
China has the advantage of being an important consumer market in the world. This has become valuable in the selection and development of new technologies. Although the industrial revolution began with technologies, the implementation of technology cannot be separated from specific market demands and application scenarios.
In the new round of industrial revolution, China should not only strengthen the resilience of its own industrial chain structure, but also work closely with neighboring countries through bilateral and regional free trade agreements, and become an engine of shared development. This will be an important task for the country to support its foreign trade and seek new sources of growth in the years to come.