US Shifting Supply Chains: China Expected to Lose 3m Jobs to Vietnam

• 24 September 2023
• Construction Focus
• 4158 Views

As the United States and Vietnam strategically realign their supply chains, aiming to reduce reliance on China, the recent shift in manufacturing could have substantial implications for China’s job market. A report by Rabobank in 2022 estimated that up to 28 million Chinese jobs directly depended on exports to the West. Consequently, this “friend-shoring” strategy, as it is called, could potentially impact millions of livelihoods in China, especially in low-tech manufacturing. Approximately 300,000 of these jobs are anticipated to move from China to Vietnam, signalling a noteworthy transition in the global manufacturing landscape.

China, long considered the world’s factory, is grappling with various pressures, including rising labour costs and an increasingly unpredictable operational environment. As a result, corporations are reevaluating their business relationships with China. During the US-China trade war that began in 2018, businesses of all sizes began relocating their manufacturing operations to emerging markets like Vietnam and India, partly in response to tariffs and geopolitical uncertainties.

Vietnam’s economy has seen substantial growth in recent years. In the first eight months of 2023, it attracted approximately US$18 billion in foreign investment, marking an 8% increase from the previous year. Notable companies such as Samsung, LG, and Foxconn, major suppliers for Apple, have established manufacturing facilities in Vietnam.

Despite its economic strides, Vietnam faces some challenges. With a population of about 100 million, it has a shortage of highly skilled workers, currently constituting only 11% of the workforce. Moreover, the country grapples with transport infrastructure issues and electricity shortages, as highlighted in the latest World Bank report published in August.

For the United States, the strategic cooperation agreement set to be signed with Vietnam presents an opportunity to bolster industrial networks in Vietnam, catering to the demands of the US market. Simultaneously, this move aligns with the gradual shift away from China’s industrial dominance. For Vietnam, it represents a substantial opportunity to attract large-scale investments, particularly in the technology sector, strengthening its industrial base.

As the world witnesses the realignment of global supply chains and the strengthening of US-Vietnam ties, the economic dynamics of Asia are evolving rapidly, and Vietnam is emerging as a pivotal player in this transformation.

• Analysis