Chinese investments in Vietnam: future prospects

On December 12, 2023, Chinese President Xi Jinping made a historic state visit to Vietnam, marking the 74th anniversary of diplomatic relations between the two nations with the signing of 36 cooperation agreements. This meeting consolidated ties between China and Vietnam, highlighting mutual commitment to promoting trade and investment relations.

Foreword: History and Foundation of Relations between China and Vietnam

The economic partnership between China and Vietnam is rooted on solid foundations, intertwining geographical proximity, a shared thousand-year history and complementary economic interests. Geographic proximity, with over 1,300 kilometers of shared land border, has fostered an easy exchange of goods, resources and ideas, contributing to the development of commercial and cultural ties over the centuries.

The shared history, dating back millennia, has spanned various eras characterized by cultural, commercial and political influences. This rich historical heritage creates a fertile basis for mutual understanding and trust-building, going beyond contemporary political and economic changes.

Complementary economic interests constitute the fundamental pillar of this partnership. China, a global manufacturing power, has found a strategic ally in Vietnam to expand its presence in Southeast Asia, taking advantage of its skilled labor and competitive production costs. At the same time, Vietnam has become a crucial player in the global production chain, offering unique resources and expertise. This synergy has created fertile ground for mutual investments, supporting the economic growth of both nations.

The economic interconnection between China and Vietnam has been enhanced by regional and global initiatives. Participation in ASEAN and the Belt and Road Initiative has provided a structured framework to deepen economic cooperation, improve infrastructure and facilitate trade, contributing to sustainable economic growth in the region.

The Rise of Chinese Investment in Vietnam

From a business perspective, Foreign Direct Investment (FDI) from China to Vietnam has seen a notable increase over the past five years, driven by the “China + 1” strategy. As of 2023, China has invested nearly $1.3 billion in 233 projects in Vietnam, ranking sixth among 144 countries with interests in the country. This momentum has generated positive expectations for 2024 across various industry sectors.

Key Sectors: Automotive, Energy, Textiles and Transport

The automotive sector has attracted significant investment, with Cherry Automobile earmarking $800 million for a plant in Thai Binh and Tesla rival BYD Auto planning to build a $250 million factory in Phu Tho, focused on production of spare components.

In the energy industry, Trina Solar increased its investment in Thai Nguyen with $420 million for the production of photovoltaic panels, joining Jinko Solar's $1.5 billion project, which started in October 2023.

Tycoon Ma Jianrong has played a key role in the textile and garment industry, investing more than $700 million to support the production of giant Shenzhou International Textile Group through subsidiaries Worldon Vietnam and Gain Lucky, creating nearly 8,000 jobs by end of 2023.

In the transport sector, the launch of the new warehouses of Cainiao, the logistics arm of Alibaba Group, and the consolidated presence of companies such as SF Express, Sinotrans and Oocl have further strengthened China's position in Vietnamese territory.

Notable manufacturing projects include the opening of a factory in Bac Ninh province by Cayi Group, an international wholesaler of stainless steel tools, and the expansion of operations of Yangjie Technology, a leading semiconductor company listed on the Shenzhen Stock Exchange, in the same province.

Outlook for 2024: Growth and Cooperation

Looking to 2024, a further increase in FDI from China to Vietnam is expected, supported by mutual encouragement from heads of state to stimulate post-pandemic economic recovery. The commitment to enhance cooperation in high tech and the digital economy indicates a direction towards high value-added sectors.

Key Factors: Geographic Location and Historical Relationships

The geographical location and historical relationship between China and Vietnam, both socialist countries and adjacent to each other, are crucial to bilateral development. These factors, together with complementary interests and strong diplomatic relations, offer prospects and potential for consolidated trade and investment cooperation.

The increase in Chinese investment in Vietnam represents a phenomenon of global significance, promising economic benefits and greater integration between the two nations. The sectoral diversification of investments and the orientation towards sectors with high added value indicate an economic partnership that looks to the future, promoting sustainable development and shared prosperity. China and Vietnam are on the path to ever-closer collaboration, shaped by economic growth and a shared vision for the future. Italy, as the second largest manufacturing country in Europe, can play a role in this partnership between Vietnam and China, contributing its technology and improving the value chain in Vietnam. Currently, according to data provided by the ICE office in 2023, there are around 110 Italian companies present in the area, and the number of investments continues to grow.

By: Attorney Carlo Diego D'Andrea, Vice President of the European Union Chamber of Commerce in China