Vietnamese furniture manufacturers have to worry about it! Chinese furniture manufacturers are planning to move to Vietnam
Many solid wood furniture companies in China are considering setting up production bases in Vietnam, which has caused concern among domestic manufacturers in Vietnam.
During the China-Tianjin-Hebei Vietnam Trade and Investment Fair held in Ho Chi Minh City, Gao Xiuzhi, president of the Tianjin Furniture Industry Association, told local media that the member companies of the association are planning to move their production lines to Vietnam. Labor costs in China have risen rapidly, while Vietnamese workers have relatively lower wages. In addition, Vietnam is cutting tariffs in accordance with its commitments to relevant international trade agreements, which has prompted Chinese manufacturers to build factories in Vietnam and manufacture export products locally – the origin of these products will be labeled as “Vietnam”.
Gao said that many Chinese companies plan to travel to Vietnam to find investment opportunities. These companies have huge production scales. There are 7,000 solid wood furniture companies in Tianjin alone, including 3,000 manufacturers.
According to reports, China exports US$10 billion worth of wood products to the United States each year, which is much higher than Vietnam’s US$2 billion export to the United States. However, as Chinese products are subject to high anti-dumping duties, their competitiveness in the US market has declined. In this case, the Chinese company hopes to avoid such tariffs by moving the production line to Vietnam. A person in charge of a furniture company in Vietnam said that some Chinese manufacturers have visited Vietnam. “They hope to continue to export solid wood furniture to the United States. After all, it is a huge market with sales of 30 billion US dollars.”
Huang Wenxing, vice chairman of the Ho Chi Minh City Handicraft and Timber Industry Association, said that despite the withdrawal of the US from the Trans-Pacific Partnership (TPP), Chinese companies continue to invest in Vietnam. Some Chinese companies began to consider moving their production bases to Vietnam two years ago. The anti-dumping duties imposed on Chinese furniture have prompted US importers to transfer orders to other Southeast Asian countries, including Vietnam, the largest furniture manufacturing country in ASEAN, and China’s largest competitor.
However, Huang Wenxing said that it is possible for Chinese companies to export their products to Vietnam and then export them from Vietnam to other countries to enjoy preferential tariffs on Vietnamese products. “This will be bad news for the Vietnamese wood products industry.” Vietnam According to data from the Wood and Forest Products Association, Vietnam’s exports of wood products to other countries will reach 7.8 billion to 8 billion US dollars this year, and the United States, China, Japan and Europe are its largest export markets.
Why are so many companies investing in Vietnam?
There are many reasons, but there are two main ones. Simply put, one is human and the other is not limited.
People refer to the labor force. Compared with China at the present stage, Vietnam’s labor advantage lies in cheapness and youth. According to data released by the Vietnamese Academy of Labor and Social Sciences, in 2015, the population of Vietnam reached 91.7 million, of which the working-age population, that is, between 15 and 49 years old, reached more than 47 million. Among them, the average monthly wage of the employed population is about 4.9 million VND (about 224 US dollars), far below the Chinese level. The Economist Intelligence Unit under the British “Economist” magazine predicted that by 2019, the cost of hourly labor in China’s manufacturing industry would be 177% of Vietnam’s.
In addition, according to some companies that have set up factories in Vietnam, Vietnamese workers are hardworking compared to some tropical countries in Southeast Asia. In addition, with the improvement of the national economic level, Vietnamese people’s pursuit of material life has become more active. Many workers have changed from being unable to accept overtime to actively requesting overtime, and because culture is similar to China, workers are also easy to manage.
The second main reason is “unrestricted” and includes two aspects. First, because Vietnam has signed a number of free trade agreements with European and American countries in recent years, the taxation to the European and American countries is small, and the upcoming Vietnam-EU Free Trade Agreement and the future entry into force of the TPP may make the company feel that it should arrive as soon as possible. The layout of Vietnam has become a tax-free concession in order to meet the requirements of origin such as “Made in Vietnam” as required by the FTA.
On the other hand, Chinese companies are also more concerned about the fact that the Vietnamese market has not set procurement quotas and can evade anti-dumping policies in countries such as Europe and the United States.
The two main reasons, coupled with the strong attraction of the Vietnamese government, foreign capital (including Chinese-funded enterprises) have moved their factories from China to Vietnam, from “Made in China” to “Made in Vietnam.” This has become an inevitable trend. In the first five months of 2016, Vietnam attracted foreign direct investment amounting to US$10.15 billion, a year-on-year increase of 136.4%.