Dhaka, Thursday, 09 July 2020

Supply chains shift to Vietnam

Supply chains shift to Vietnam

Apparel Desk :Strong foreign direct investment flows from China and Hong Kong into Vietnam are a possible sign of regional supply chain reshuffling. In the first four months of this year, FDI from China and Hong Kong has outstripped investment from all other major investors year-to-date, as well as the same period last year.

China’s investments in Vietnam include sectors such as energy, construction, manufacturing, and property. Nearly 40 companies explicitly stated plans to shift production from China to Vietnam since January 2017.

Trade tensions between the United States and China may have prompted supply chain shifts to Vietnam. Supply chain shifts so far have mainly taken the form of using or expanding existing facilities and adding capacity, instead of greenfield investment or acquisitions. There has been greater interest from US companies in outsourcing to Vietnam, especially in sectors such as apparel and furniture. It’s unclear though whether the cushion from supply chain shifts will be sufficient to offset the negative impact from the trade war or a weak semiconductor recovery. Vietnam also has low domestic value-added in exports, with limited spillovers from FDI. Also, Vietnam might be most at risk of being labeled a currency manipulator by the US as a pretext for trade tariffs.