news

produced by huxiu business consumption group

author: zhou yueming

editor: miao zhengqing

title image｜visual china

if you like citywalk, vietnam is probably not a good choice. the speeding motorcycles, the roaring streets and the small intersections without traffic lights always make people nervous.

but if you want to invest and build a factory overseas, vietnam becomes a popular choice.

vietnam in 2024 is very lively.

in the first quarter of 2024, foreign direct investment (fdi) in vietnam reached 6.17 billion us dollars, a new high, an increase of 13.4% year-on-year, and the momentum was fierce. among them, the most active ones were companies from china.

although according to statistics from the ministry of investment and development of vietnam, among the newly registered foreign direct investment capital in 2023, funds from mainland china ranked only second (us$3.544 billion, first was singapore at us$3.77 billion, and third was hong kong, china at us$3.413 billion),but many investments from mainland china are made through singapore and hong kong, china. in terms of both quantity and total amount, china's investment in vietnam undoubtedly ranks first.

image source: vietnam first stop

many chinese companies that did not go overseas in previous years also came out in 2024, especially those with a large share of the us market.

“as far as we know, there are currently more than 300 chinese listed companies that have established production bases in vietnam, and there are more than 3,000 listed companies in the chinese manufacturing industry."wang li, founder of vietnam first station, told huxiu.

the reasons why chinese companies are flocking to vietnam are not complicated.

the main factor is to avoid high tariffs. "for most industries, the difference in tariffs between exports from china and vietnam to the united states is 20%-25%. "industry insiders told huxiu that some products even have double anti-dumping and anti-subsidy tariffs (anti-dumping and anti-subsidy tariffs) against china, for example, the tariff on candles exported from china to the united states is over 100%, but there is no tariff on candles exported from vietnam.

another reason is that compared with other popular low-tariff regions such as mexico and brazil, vietnam's overall cost is still relatively low.

“brazil's manufacturing and procurement costs are 3-4 times that of vietnam, while mexico often has problems with scarce raw materials, immature technology and low production efficiency."xu linjun, general manager of the vietnam base of tcl industrial's pan-smart screen bu manufacturing center, told huxiu. for example, purchasing a batch of cartons in vietnam may only cost $10, while in brazil it will cost $40.

of course, the most important reason why a large number of chinese companies chose to flock to vietnam this year is to prevent the escalation of trade frictions between china and the united states.

trump's re-election has reminded many chinese companies of the difficult times during the sino-us trade war in 2018. 2018 was the first outbreak point when chinese companies invested heavily in building factories in vietnam.

"before, we took the initiative to go to vietnam to look for opportunities, but now we are 'forced' to come here." a senior industry insider who has been rooted in the vietnamese market for ten years lamented.

chinese companies are plagued by various issues such as trade frictions, tariffs, and origin requirements, and they are in urgent need of finding a backup plan.

rising land prices

although tariffs have been avoided and trade frictions have been prevented, vietnam has also brought new challenges to chinese bosses.

the first difficulty is to grab land.

the influx of companies has made land a scarce resource in vietnam.

there is not enough land in the south (many factories are concentrated in the south, such as garment and textile factories, furniture factories or home appliance factories), and the land in the north has begun to be developed on a large scale.

according to industry insiders, around 70% of investment in 2023 will take place in the north.

compared to the south, the north has more land resources and better infrastructure, with highways in almost every province. in addition, the north is closer to china, making logistics and transportation more convenient. if you depart from shenzhen or dongguan, you can reach hanoi in two days (including customs clearance), while in the south, you generally have to go by sea, which is much slower.

however, even in the north, the core area is almost occupied.

wang li told huxiu that most of the factories in the north are concentrated in bac ninh and bac giang, which are only about 30 kilometers away from hanoi.samsungthe establishment of factories here has boosted the electronics industry. as more and more companies are established, the concentrated areas have to spread to the surrounding areas. for example, haiphong (the largest port in northern vietnam) has become one of the most important production bases. some companies even choose to locate their factories in places that seemed more remote in the past, such as fushou (relatively mountainous,bydsite selection), for example, nghe an, which is already located in the north-central part of vietnam.

image source: vietnam first stop

as land is scarce, land prices naturally continue to rise.

“in 2018, the average price of industrial real estate in the north was still between $60 and $80 per square meter, but by 2023 it had risen to $120 per square meter."wang li said that it is common for land prices to double.

image source: vietnam first stop

the shortage of land has prompted the vietnamese government to raise various thresholds.

first, the investment in industrial real estate has been greatly tightened, especially trying to prevent foreign investment in industrial real estate.

in vietnam, the threshold for real estate investment has always been high. for chinese people, they can buy apartments but not houses directly; for chinese companies, they can buy land to build factories, but rarely participate in land investment (such as leasing factories, dividing and selling land).

chinese institutions have participated in industrial real estate investment before, but their subsequent expansion plans were largely unsuccessful.

for example, there is a large industrial park in haiphong, vietnam, which was invested by shenzhen investment holdings, and the longjiang industrial park in southern vietnam was invested by a private enterprise in wenzhou. but these investments were made many years ago, and the parks have long been occupied by various factories.

for the vietnamese government, land is very sensitive, especially in the current situation where land is expensive. in comparison, vietnam is more welcoming to international institutions to participate in land investment, such as singapore's sembcorp and other companies.

of course, for the vietnamese government, it is not only raising the threshold for land investment, but also the threshold for companies to settle in.

they have too many big projects. in this context, the vietnamese government naturally began to pick and choose.

environmentally friendly and high-tech enterprises are given priority, and simpler industries such as traditional clothing processing are beginning to be excluded.the larger the investment of foreign-funded production enterprises, the less they want it. moreover, the fire protection and environmental protection requirements of factories are increasing. if they want to meet the requirements of the vietnamese government, the investment in these links is not low.

in some popular areas, the threshold for registered capital has been quietly and significantly increased.

wang li gave tiger sniff an example:in quang ninh province, vietnam, which is close to china, it used to take us$500,000 or us$1 million to register a foreign-invested manufacturing company. but this year, after a chinese company followed these procedures, it was unable to get the deal done. later, it was learned that, although there are no explicit regulations, the investment threshold for foreign-invested factories here has been raised to more than us$5 million, and the funds must actually be in place.the reason behind this is that quang ninh province ranked first in the total amount of foreign investment attracted in vietnam in 2023, and ranked second in january-august 2024.foxconnin the past two years, four new factories have been invested here.

labor costs are not as low as expected

scarce land and its ever-increasing land prices have become a major problem for chinese bosses. they soon discovered that attracting talent has become another major problem.

the craze for investing and building factories in vietnam has not only made land a scarce resource, but also made the population, which accounts for only 1/14 of china's, a target of competition.

management positions are particularly hotly contested.

some factories even give junior management (such as workshop directors) a 30% salary increase within a year to prevent poaching. some local vietnamese management have learned to change jobs frequently, and their salaries can even double in the short term.

in addition to management, it is also difficult to recruit grassroots workers. especially when factories in the area start working at the same time, they have to raise prices to compete for workers.

in fact, the wages of vietnamese workers are not as low as imagined. when visiting tcl's vietnam factory, xu linjun told huxiu:"the wage cost of vietnamese workers is about 70% of that in china."

according to statistics from industry insiders, the monthly salary of vietnamese workers is about 3,000 yuan (including social security and 2 hours of overtime pay), while in factories in huizhou, china, the average salary of workers is about 3,800-4,000 yuan. for office staff (white-collar workers) with a certain degree or professional skills, the salary is higher, about 4,500 yuan per month.

in vietnam, there is no advantage in labor costs, and its biggest advantage is the young workforce.

in many factories, 70% of the workers are between 18 and 30 years old, with an average age of 25. in china, young people are mostly unwilling to work in factories.many workers in the huizhou factory are over 40 years old. when processing some delicate parts (such as installing tiny screws), some workers can't even see clearly. "xu linjun said.

however, even though the staff is young and vietnam is already a more efficient region in southeast asia, according to industry insiders, vietnam's production efficiency is only about 70% of that in china. when we visited factories, we often saw some phenomena: young workers often stopped moving on the assembly line. people who were with us lamented that this was almost impossible in chinese factories, and their hands would keep repeating the same movements.

in vietnamese factories, it is not easy to retain and manage employees.

vietnam's trade union organization is relatively developed. the union leader has great authority in the factory and can talk directly to the company boss. when the factory's salary and benefits do not meet the workers' expectations, strikes may occur.

an industry insider once gave huxiu an example:during the spring festival one year, the workers organized a general strike because they felt that the spring festival gifts they received this year were not as good as last year's. at that time, the production capacity was the most tense before the festival. in order to appease the workers, the factory had to give out several times more gifts before resuming normal production.

vietnamese young people are under considerable pressure in life and are very sensitive when their welfare benefits are inadequate.

locals in ho chi minh city gave huxiu several examples: in ho chi minh city, housing prices are approximately between 15,000 and 28,000 yuan per square meter; renting a slightly larger room in a better place would cost 1,500 to 2,000 yuan per month; if you want to raise children, the cost of education is also a heavy burden. vietnamese children usually have to attend cram schools and winter and summer vacation courses, and one summer vacation may cost 1,000 to 2,000 yuan.

it should be noted that in vietnam, a monthly salary of 4,000-5,000 yuan is already a very high salary, and most workers' wages are around 3,000 yuan.

under these social and cultural backgrounds, how to manage a large number of local employees has become a technical job.

industry insiders told huxiu that after years of running-in, chinese mainland companies have accumulated a lot of management experience in vietnam. it is said that compared with factories in south korea and taiwan, there are fewer management problems.

during a visit to ho chi minh city, tcl, which has been rooted in vietnam for 25 years, told huxiu many local management methods.

first, try to recruit vietnamese locals as supervisors, and chinese employees should try to play the role of technical support. if you really can't recruit people, try to hire a vietnamese local translator. communication between locals can reduce many misunderstandings caused by cultural differences.

in addition, special attention should be paid to the construction of corporate culture in vietnam.

"they attach great importance to rituals and group activities," said xu linjun.

most of the employees in vietnam are very young and single, and the daily work in the factory is relatively boring. therefore, every time there are important festivals, tcl will organize many cultural activities, and the employees will also organize them spontaneously. the cost of these activities often reaches hundreds of thousands of rmb, but they must be held to improve employees' recognition of the company.

this atmosphere of liking team-building activities is very different from that in china, where employees generally have little interest in them. in vietnam, if there are no such activities, the factory’s attractiveness will be reduced.

in addition, we must not emphasize the differences between china and vietnam in various details.

for example, the treatment of vietnamese managers and supervisors in factories must be equal to that of chinese employees of the same level. another example is that vietnam has a one-day off per week law. in order to keep pace with the local work rhythm, managers sent from china, who were supposed to have two days off per week, were changed to one day off per week to prevent dissatisfaction among vietnamese workers.

cultural differences are often a major challenge in the management of multinational companies. "chinese companies need to realize that you are a foreign company in vietnam, and the key is to adapt to the thinking, working habits and communication methods of vietnamese employees," said xu linjun.