China, Southeast Asian neighbors should boost industrial cooperation

BEIJING, October 8, 2022 /PRNewswire/ — By Beijing revieww: In 20On January 19, TCL, a Chinese consumer electronics company, started to build its new manufacturing base in Vietnam. The new base has improved TCL’s production capacity with its products sold not only in Vietnam but also to other markets in South East Asia and beyond.

In the first four months of 2022, total foreign investment in Vietnam outmoded $10.8 billionup 88.3% over one year, according to its Ministry of Planning and Investment.

The country’s exports in the first quarter reached $88.58 billionup 12.9% year on year, according to data from the Ministry of Industry and Commerce.

from vietnam growing status in the global supply chain has sparked talk of the possibility of him withdrawing orders from China. In response, Wang Xiaosong, a researcher at Renmin University of China the National Academy of Development and Strategy, pointed out that China should adapt to the tendency of certain companies to relocate their activities South East Asia.

“It is a natural process of industrial modernization for China“Wang said Beijing Reviewadding that the development of close neighbors will facilitate mutual prosperity.

The strategy of offshoring labor-intensive jobs to countries with competitive local resources and much closer to target markets, while maintaining fundamental and critical ties in China, is motivating a growing number of Chinese manufacturers to set up overseas. For example, while TV assembly is the core business of TCL’s Vietnamese base, the company’s factories in China produce high added value products such as billboards.

“Industrial relocation started in 2015,” Wang said. “Economic development has increased the cost of labor-intensive businesses in China companies therefore turned to Southeast Asian countries with cheaper labour.”

In addition, emerging markets in the region also offer preferential policies to attract foreign investors. In Vietnam, for example, companies making new investments in sectors such as technology, footwear and automotive are taxed at 10% for 15 years. This period also includes a tax holiday for the first four years and a 50% reduction in the corporate income tax rate for the following nine years, according to Bloomberg Tax.

Some businesses were transferred due to non-market factors. Hanyu Group is a Chinese company producing drainage pumps. Three years ago, Hanyu’s products were included on the US list of Chinese products to be subject to additional tariffs. His US customers told the company’s president that he had to take some of his operations overseas or they would look to other suppliers. Therefore, he moved part of his assembly line to Thailand.

COVID-19 outbreaks have also raised concerns about a possible exodus from the industrial chain of China.

“Southeast Asian countries are unlikely to replace China destination of foreign investment,” Wang said, citing statistics released by from vietnam Ministry of Planning and Investment.

Despite the 88.3% increase in foreign investment, from vietnam newly registered capital fell by 56.3% in the first four months of the year. This means that few companies established new factories in the country and increasing foreign investment came from companies already present in the country.

Over the same period, foreign direct investment flowing into the Chinese mainland rose 26.1% year-on-year to reach $74.47 billionaccording to the Ministry of Commerce.

China has comprehensive industrial clusters, technological accumulation and a huge market that cannot be replicated in the short term, he added.

“The growth of Southeast Asian markets is actually a boon for China“Wang said. “We have close industrial chain ties with our near neighbors.

Vietnamfor example, imports top flow core equipment, raw materials and supporting facilities mainly from Chinawhich will create more opportunities for Chinese suppliers, he explained.

According to the General Administration of Customs of Chinaexchanges between China and Vietnam hit $230.2 billion in 2021, with annual growth of 19.7%. China has been from vietnam largest trading partner.

Wang suggested China to exploit the potential of its less developed areas where labor costs are relatively low and which could be new destinations for industrial reorientation.

SOURCE Beijing Review

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