Recently, the world has witnessed the escalation of US-China trade war with a series of tariff barriers that both sides imposed on imported goods from their “rivals”. The impact of this war has crossed the border of the two countries and quickly impacted the global economy. In Vietnam, it can be noted strong influence of the war on the industrial real estate market when receiving the wave of investment movement from foreign investors in China and even Chinese investors.
Vietnam industrial real estate received the wave of investment movement
In the context of integration, the US-China trade war gives Vietnam real estate market more opportunities than difficult. Capital inflows in countries including the US, China and some other countries due to “avoidance” of the trade war will “flow” into Vietnam. At the moment, foreign investors in China and Chinese investors tend to move plants and factories to neighboring countries, and Vietnam is one of the places receiving this wave of movement.
The US-China trade war has given Vietnam real estate markets more opportunities
In early 2019, Goertek – the company that assembles Apple’s AirPods headset in China spent 260 million US dollars to invest in building a new plant in Que Vo Industrial Park, Nam Son Commune, Bac Ninh City. Along with Goertek, at the end of 2018, Hanwha (South Korea), one of the 500 largest corporations in the world, inaugurated Hanwha Aero Engines aircraft spare parts plant with an area of 9 hectares in Hoa Lac Hi-Tech Park with total investment capital of 200 million US dollars. Yokowo Corporation (Japan) also spent 18 million US dollars for its 3.6 ha plant in Dong Van II industrial park (Ha Nam). This is one of the moves to evade strong U.S. tariffs on products made in China.
Goertek spent 260 million US dollars to build a new plant in Bac Ninh – Vietnam in early 2019
Not only foreign investors, Chinese companies also feel insecure before the war of the world’s two largest economies. A typical example is TLC and giant in garment industry – Huafu. First, TCL quickly chose a 7.3-hectare area to set up a TV production plant with an investment of 53.56 million US dollars in Binh Duong in early 2019. Huafu also spent 362 million US dollars to build plant in Long An. The movement of TCL and Huafu indicates that not only multinational companies are concerned about the high tax rates, but also domestic companies are also forced to find a “withdrawal” plan for themselves. According to VinaCapital, some big names in electronics and garment industry such as Foxconn, Lenovo, Sharp, Asics, Nintendo, and Kyocera are also considering moving their production plants to Vietnam.
TLC is one of the giant Chinese corporations relocating its plant to Vietnam to avoid tax
Why did Vietnam become a production hot spot after US-China trade war?
One of the consequences of the US-China trade war with strong tax impositions is the fluctuation of production costs, particularly the fluctuations in land rental price in the Chinese market. This fluctuation makes Vietnam become the next destination for investors thanks to the favorable factors such as: the push from free trade agreements, stable political environment, impressive economic growth index, favorable geographic location, affordable labor costs and an easy-to-integrate market. New free trade agreements have had a positive impact on Vietnam’s industrial market. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was officially established in January 2019 and the EU – Vietnam Free Trade Agreement (EVFTA) being signed in June 2019 will eliminate 99% of customs duties, thereby increasing attraction in the field of industrial real estate.
Noted by the Asian Development Bank, Vietnam maintains position as the fastest growing economy in Southeast Asia in 2019 with a GDP growth rate of 6.8%. While, GDP growth rate is 5.8% in Indonesia, 4.5% in Malaysia, 3.5% in Thailand and 2.4% in Singapore. At the same time, in 2018, World Bank also rated Vietnam as the 69th out of 190 economies that are easy to do business and higher than rank of Thailand, Malaysia and Singapore.
Vietnam maintains position as the fastest growing economy in Southeast Asia in 2019
In addition, factors such as abundant labor resources at affordable prices and lower factory construction costs than other countries in the region at the moment make enterprises more interested in building production plants in Vietnam.
It is predicted that industrial real estate in the North will suffer greater fluctuations in the near future because of its proximity to China, which is convenient for factory relocation. Moreover, there are quite a few Chinese enterprises that are gathered here to create connections with new enterprises that plan to move. Some provinces such as Hai Phong, Quang Ninh, Bac Ninh, Bac Giang or Hung Yen are expected to be the stopping point of this movement.
