Cover Story: China’s Factory Exodus Is Turning Vietnam Into the World’s Assembler

A 90-minute drive north of Hanoi lies Bac Ninh, a region rapidly transforming from rural farmland into the industrial core of northern Vietnam. The newly established Mingjie Co. Ltd. factory, a symbol of the region’s industrial boom, stands next to traditional rice paddies, reflecting the juxtaposition of modern manufacturing and rural life. This transformation illustrates a broader trend: Chinese manufacturers are increasingly relocating to Vietnam in response to U.S. tariffs and global supply chain changes. What began as modest moves during the initial U.S.-China trade war has evolved into a mass shift, with companies seeking to maintain U.S. market access, benefit from lower labor costs, and capitalize on reduced tariffs. Mingjie, for instance, followed its largest client to Bac Ninh to manufacture for export, driven by direct demands from clients post-pandemic to operate in Vietnam or risk losing business. However, escalating competition for land and workers, along with rising costs, challenge the profitability of these relocations, as production costs in Vietnam are now often higher than in China, leaving firms dependent on the precarious advantage of lower tariffs [para. 1][para. 2][para. 3][para. 4][para. 5][para. 6][para. 7].

Former U.S. President Donald Trump’s administration imposed a 46% reciprocal tariff on Vietnamese exports in April, later reduced to 20% in a bilateral deal in August—still slightly above the 19% average faced by other Southeast Asian peers [para. 8]. As a result, northern Vietnam, and Bac Ninh in particular, is taking on the characteristics of south China’s factory towns from two decades ago. The region hosts giants like Samsung, Canon, and increasing numbers of Chinese firms, including Apple suppliers. This influx deepens Vietnam's role as a world assembler. The initial wave of manufacturers in the late 1980s was driven by cost avoidance; recently, the U.S.-China trade war has boosted this migration, with inquiries from Chinese firms seeking relocation to Vietnam skyrocketing since 2018 [para. 9][para. 10][para. 11][para. 12][para. 13][para. 14][para. 15][para. 16][para. 17].

Vietnam’s position near southern China is logistically beneficial. Components can arrive quickly by road or sea, reinforcing trade ties between the countries. By 2024, ASEAN became China’s largest trading partner, with bilateral trade reaching $982.3 billion. Vietnam alone imported $144.3 billion in Chinese goods while exporting $119.6 billion mostly to the U.S., maintaining a significant trade surplus with the U.S. and a deficit with China. Studies confirm an expanding share of U.S. imports indirectly sourced from China via Vietnam, especially in industries like textiles, footwear, and electronics. China’s direct share of U.S. imports fell from 21.6% in 2017 to 13.4% in 2024, while Vietnam’s share more than doubled [para. 18][para. 19][para. 20][para. 21][para. 22][para. 23][para. 24][para. 25].

Historically, Vietnam’s appeal lay in low labor costs. Wages have risen sharply, with factory workers now earning 2,500-3,000 yuan per month, approaching those in China’s interior. Land prices for industrial use have soared, at up to $200,000 per acre in Bac Ninh, often two to three times higher than parts of China. Despite these costs, a demographic dividend—one million annual births, and a new generation entering the workforce—remains. U.S. tariffs provide a crucial advantage: Vietnamese goods are around 15% costlier than Chinese, but face a 20% tariff compared to 57.6% on Chinese products, preserving a competitive gap [para. 26][para. 27][para. 28][para. 29].

Vietnam’s incomplete supply chain is a hurdle; many components are still imported from China. Electronics have seen progress, with about 70% of raw materials locally sourced, but other industries, notably textiles, remain highly dependent on Chinese inputs. The Vietnamese government lacks resources to provide extensive support or subsidies seen in China. The U.S. is increasing scrutiny, with a new trade agreement placing a 40% tariff on transshipped goods whose origin remains ambiguous due to Vietnam’s supply chain dependence [para. 30][para. 31][para. 32][para. 33][para. 34][para. 35][para. 36][para. 37][para. 38].

Beyond manufacturing, Vietnam—with its 100 million population (third largest in ASEAN) and sustained 7% GDP growth—is becoming a key consumer market. Companies like Shineray Motors have localized products to win over local consumers, capturing a 30% share of Vietnam’s mini-commercial vehicle market and surpassing Suzuki. Major Chinese automakers, such as Geely and Great Wall Motor, are also investing, cementing Vietnam’s dual role as an export hub and a rising consumer battleground [para. 39][para. 40][para. 41][para. 42][para. 43][para. 44][para. 45][para. 46][para. 47][para. 48][para. 49].