Vietnam seeks gains from trade war

Volatile ties between Trump and Xi Jinping have unsettled investors

Growing tension between China and the United States over the last year has presented Vietnam with a number of opportunities, increasing its appeal to foreign investors.

Vietnam has quietly welcomed manufacturers seeking respite from a spasmodic trade war, as Presidents Trump and Xi Jinping face off over tariffs and their countries’ broader geostrategic rivalry.

It has emerged as the most attractive emerging economy in Asia for investors, competing successfully over wages, power costs and infrastructure.

Since the middle of the year, Vietnam has seen a surge of interest from companies alarmed by the incipient trade war between Washington and Beijing.

Manufacturers of auto parts, textiles and electronics are amongst those sounding out Vietnam as an alternative manufacturing centre to China.

Analysts say the number of enquiries has increased three or four fold since President Trump slapped high tariffs on a range of Chinese imports.

They expect Vietnam to continue capitalising on the tensions given the volatility of policy decisions emanating from Washington and the scope for a further deterioration in its ties with China.

The apparent truce between the two sides reached in December has not convinced manufacturers that the worst is over.

Vietnam boasts the largest labour force in Southeast Asia and wages of just over $200 a month are less than half of those in China.

Electricity is also cheaper than that offered by Hanoi’s regional rivals.

Vietnam has also been highly proactive in securing free trade deals with other potential markets, highlighted by the successful ratification of the CP-TPP this year.

Apparently stable government and its geographical proximity to China are also seen as advantages for Vietnam.

Diplomatically, tensions between the two superpowers are also potentially good for Vietnam. Hanoi is able to balance its relations and achieve maximum concessions.

Analysts say that Vietnam has much more to fear from a good relationship between China and the United States, which could see its interests in the South China Sea disregarded and undermine its commercial advantages.

Vietnam has played its cards as a middle sized power on a fault line between China and the United States with great skill.

It is well placed to seek further advantage should tensions continue to grow between the two superpowers.