Research & Investment Strategy

Asia: “Made in Vietnam”

Key points

  • Rising globalisation has greatly benefitted emerging Asia as supply chain migration from developed countries fuelled the region’s tremendous export growth over the past decade
  • Vietnam has been a standout winner in gaining export market share in labour-intensive and low margin segments where China has lost competitiveness
  • The country’s attractiveness as a supply chain location is credited to its successful integration in international trade, geographic advantage, and manufacturing competitiveness – including cheap labour, and favourable government policies for foreign investment
  • Vietnam has successfully moved into the space created by China’s continued economic evolution. However, Vietnam’s relatively small size compared to China, means that it cannot replace China’s “world’s factory” title. Instead, as a close trading and production partner in China’s expanded supply chain ecosystem, Vietnam looks set to continue to thrive
  • COVID-19 disruptions, domestic policies, and geopolitical tensions could pose risks for Vietnam’s continued rise as a manufacturing and export powerhouse
  • One of the most dramatic economic developments of recent decades has been the integration of emerging market countries (EM) in Asia – defined here as Asia ex-China – into global trade. Within the region, Vietnam ranks high on economic performance, fuelled by a powerful gain of manufacturing and export capability. Our previous research shows that Vietnam has been the standout winner of global export market share in recent years, particularly as China has successfully moved up the value-chain in global trade, increasingly vacating the lower-value-added, labour-intensive space as it becomes less competitive[1]. This paper investigates the reasons behind Vietnam’s success and discusses the prospects for broadening its position in the regional and global production ecosystem.

Macro factors lead to supply chain shifts

Asia’s exports, as a share of the world’s total, rose to almost 20% at its peak in the mid-1990s (Exhibit 1).These gains occurred mostly prior to the 1990s, largely reflecting the rise of developed economies in the region – notably Japan, but also South Korea, Taiwan and Singapore. Since then, market share has stabilised, although a divergence in export performance between developed and emerging economies has emerged. This is due to increased globalisation of production process, leading to low-value-added assembly lines shifting to developing economies, whereas developed economies have focused on specialising high value-added products and components.


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