With its rising costs, China is no longer the go-to destination for many businesses, and Vietnam has arisen as a serious competitor. Recent trends show that the number of orders shifting from China to Vietnam has seen a significant increase.
In the past few years, a growing number of businesses have relocated their operations from China to Vietnam in an attempt to escape rising costs and an increasingly complex regulatory environment.
Located in a strategic position for foreign companies with operations throughout Southeast Asia, Vietnam also serves as an ideal export hub to reach other ASEAN markets.
Compared with other developing markets in the region, Vietnam is a clear leader in low-cost manufacturing and sourcing. Its processing and manufacturing industry accounted for nearly 20 percent of the GDP in 2023, with the government’s goal of raising it to 25 percent of the GDP by 2025.
Another driving force behind Vietnam’s growing popularity is the country’s network of free trade agreements (FTAs).
Given the ongoing trade war between China and the US, alongside Vietnam’s recent FTAs, such as the RCEP, the EVFTA, and the UKVFTA, the country is steadily becoming more open to international trade and investment.
In 2020, manufacturing labor costs in Vietnam were approximately 50 percent of those in China at US$2.99 per hour compared to US$6.50 per hour respectively, and around 40 percent of those reported in Thailand and the Philippines.
As of 2024, HR platform Velocity Global ranked Vietnam among the top 10 countries with the lowest minimum wages. Vietnam’s regional minimum wage ranges from US$140 (VND 3,445,000) to US$202 (VND 4,960,800) per month, while that of the Philippines and Indonesia are in the ranges of US$128-229 and US$130-325, respectively.
With the country’s workforce growing annually, Vietnamese workers are comparatively inexpensive, young, and, increasingly, highly skilled.
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