China Looks to Vietnam for Lower-Cost Labor

Ann All

Earlier this year we blogged about the rise in labor costs in China, where wages grew 16 percent in 2006, up from the more typical 3 percent to 5 percent increases of previous years.


The steep increases have prompted Chinese manufacturers to look elsewhere for lower-cost labor. A newly popular destination is nearby Vietnam, according to the Taipei Times, where wages are up to 30 percent cheaper than in China.


Chinese investment in Vietnam totaled $312 million in 2006, up from $66 million in 2005. Chinese firms are comfortable doing business in the fellow Communist country due to its close geographic proximity and close cultural connections.


While in some cases the Chinese firms are outsourcing the production of goods that are then exported to the West, a number of companies like the motorbike manufacturer profiled in the Taipei Times piece are trying to capitalize on Vietnam's growing appetite for consumer goods. An executive from Chongqing Dongli Manufacturing likens Vietnam's economy to that of China a decade ago.


Vietnam is also a key destination for China's burgeoning demand for natural resources like coal and bauxite.


Although the biggest investors in Vietnam are South Korea, Singapore, Taiwan and Japan, it is also earning attention from non-Asian countries like the U.S. and the UK.

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Add Comment      Leave a comment on this blog post
Oct 10, 2007 5:42 PM All Roads All Roads  says:
Vietnam has been getting a lot of press, and no doubt there is interest. However, operationally Vietnam is very very difficult.for exporters, logistics is a key concern and one very often over looked when facing a "30% labor cost savings". According to a recent study I saw, Vietnam's throughput is 3m TEUs (15% of Shanghai's).. and to compensate, manufacturers ar taking to the air. In fact, 70% of all airfrieght is textile, footwear, and handy crafts... and anyone in these industries know you use containers unless in case of emergencies.HR is also a large problem. Labor is cheap, but management is hard to find. 10 years behind Chongqing is 15-20 years behind Shanghai.. and people here in Shanghai still have a hard time.The key to Vietnam's success lies in its ability to become the third tier for CHINESE manufacturers. the Chinese minority in Vietnam is economically the majority, they can truck containers over the border, and like the days of old in China... Vietnam runs on a network of relationships. Something the Chinese are used to, and the Westerners are going to once again feel uncomfortable with.rwww.allroadsleadtochina.com Reply
Jan 30, 2008 4:01 PM Kim Kim  says:
does anyone know what the all in hourly manufacturing labor cost is in Vietnam? Reply
Apr 1, 2010 10:56 AM sunrisedatacare sunrisedatacare  says:


Sep 9, 2011 8:48 AM Vu Ba Tan Vu Ba Tan  says: in response to Kim

In normally they paid 1 USD for 1 hour manufacturing for worker in Vietnam


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