China may not be able to retain its position as the world's largest factory in the post-COVID era as manufacturing hubs rise in South-East Asia.
Rising labor costs, a costly trade war with the United States, and now a pandemic that originated in the country. Events of the last few years have threatened to undermine China's position as the factory of the world.
But even as countries including India race to become the preferred destination of companies wanting to reduce their dependence on China, Vietnam has emerged as a strong contender to grab a big share in the post COVID-19 world.
Here's the data. The Kearney US Reshoring Index, which compares US manufacturing output to its manufacturing imports from 14 Asian countries, surged to a record high in 2019, thanks to a 17 percent decline in Chinese imports.
The American Chamber of Commerce in South China also found that 64 percent of US companies in the south of the country were considering moving production elsewhere, according to a Medium report.
Still, US manufactured imports grew from Vietnam in a sign that the two former foes are increasingly forging close trade relationships.
China also faces tough competition from smaller nations like Thailand, Bangladesh and the Philippines because of their lower labour costs.
But Vietnam has worked hard at courting foreign companies, giving manufacturers access ASEAN free trade area and preferential trade pacts with countries throughout Asia and the EU, as well as the USA.
It has recently ramped up medical equipment production and made related donations to countries in COVID-19 need, including to the United States, Russia, Spain, Italy, France, Germany, and the United Kingdom.
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The Vietnamese economy grew by 8 percent in 2019, according to Nomura, helped by a surge in exports. It is also slated to grow 1.5 percent this year
The World Bank forecasts in a worst COVID-19 case scenario that Vietnam’s gross domestic product (GDP) will fall to 1.5 percent this year, acccording to the World Bank, better than most of its South Asian peers.
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That is not to say India has not stepped up efforts to attract investors to its own shores.
Last month, it approved incentive packages worth Rs 48,000 crore to nudge mobile giants to manufacture here.
Officials told the Economic Times the government was looking into various ways to make India an export hub to take advantage of the shift away from China after the coronavirus pandemic, especially with respect to the pharmaceuticals and autombile sectors.