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

The article explores how Vietnam, particularly its northern province Bac Ninh, is rapidly transforming into a critical hub for global manufacturing, especially as Chinese manufacturers relocate operations to circumvent U.S. tariffs and diversify supply chains. It details the factors driving this transformation, the challenges companies face, and how Vietnam is increasingly becoming not only a manufacturing base but also a burgeoning consumer market in Southeast Asia.[para. 1][para. 2][para. 3][para. 4][para. 5]

Initially depicted as a rural landscape, Bac Ninh now features newly-built factories like Mingjie Co. Ltd., a Dongguan-based manufacturer that epitomizes the southward shift of Chinese industry. After two decades exporting from China, pressure from clients during and after the onset of the U.S.-China trade war forced Mingjie to establish a production foothold in Vietnam—particularly to maintain access to global markets and favorable tariffs.[para. 1][para. 2][para. 3][para. 4][para. 5] The phenomenon has accelerated since the trade war began in 2018, as companies seek both tariff relief and operational cost advantages.[para. 3]

However, the move to Vietnam brings new challenges: rising competition for land and labor is pushing up costs sharply. Many relocated firms now face slimmer margins, sometimes producing goods at higher cost than in China, and their profitability depends on tariff advantages that could change with a single political decision.[para. 6] U.S. policy, for instance, saw tariffs on Vietnamese goods rise to 46% before being reduced to 20%—still higher than for other regional peers.[para. 7]

Vietnam’s industrial boom is visible in the proliferation of industrial parks and the influx of foreign companies, including electronics giants Samsung and Canon, and an expanding roster of Chinese firms. This mirrors Guangdong’s development 20 years ago, with small and midsized suppliers following their major clients to Vietnam.[para. 8][para. 9][para. 10] Key moments include Samsung’s $23 billion in investments since 2008 and Apple suppliers’ recent inflow, making the northern region vital for global supply chains.[para. 13][para. 14][para. 15]

With its close proximity to southern China, Vietnam enables rapid import of components—a logistical boon for companies like Mingjie. This shift has altered trade flows: ASEAN overtook the U.S. and the EU as China’s top trading partner by 2020, and Vietnam has become China’s top ASEAN trading partner, importing $144.3 billion of goods in 2024.[para. 16][para. 17] Meanwhile, U.S. imports from Vietnam more than doubled between 2017 and 2024, while direct imports from China fell, showing the success of Vietnam as an export platform.[para. 18]

Yet Vietnam’s cost structure is changing. Labor and land costs are rising steeply, with average factory wages now 2,500–3,000 yuan month—approaching levels in China’s interior. Industrial land in Bac Ninh is two to three times more expensive than in parts of China. While Vietnam benefits from a continued demographic bonus, its advantage now lies in lower tariff rates, with a 37.6 percentage point margin versus Chinese goods.[para. 21][para. 22][para. 24]

Still, supply chain gaps hinder self-sufficiency: electronics manufacturing is improving, but many precision parts and specialized materials are still imported from China. In furniture, local inputs meet most needs, but textiles remain heavily reliant on China for raw yarn and chemical fibers.[para. 25][para. 26][para. 27][para. 28] Government fiscal constraints limit Vietnam’s ability to offer incentives rivaling China’s, posing challenges for long-term full relocation of supply chains.[para. 31]

Despite these obstacles, Vietnam’s trade agreements and its strategic location ensure it remains an export base for China and Southeast Asia. The country’s domestic market is also becoming attractive; with a population of 100 million and 7%+ annual economic growth, Vietnam is evolving from a mere production hub to a contested consumer market.[para. 41][para. 42] Examples like Shineray Motors’ localized vehicles—now commanding 30% of the mini-commercial vehicle market—illustrate the opportunities for firms willing to adapt.[para. 43][para. 44][para. 45]

Chinese automakers like Geely and Great Wall Motor plan local assembly, signaling Vietnam’s growing strategic importance as both a manufacturing and consumer hub in Southeast Asia.[para. 48]