A Winner Of Sino US Trade War? How Long Can Vietnam's "Good Days" Last?

"Vietnam's biggest winner in trade war" is a recent popular argument. From a series of economic data, it seems that this is true, and there is continuing news that certain enterprises are moving the production base from China to Vietnam. Coupled with the signing of the FTA agreement with the European Union, economists have predicted that Vietnam's economy will surpass Singapore by 2029. All of these are good news for Vietnam, and many people even regard Vietnam as another "ready for China". However, reality is far from being simple.

Vietnam has recently been extremely vigilant about its claim to benefit from the Sino US trade war, and the threat posed by US leaders is already in the firing line. More importantly, although many enterprises have transferred production lines to Vietnam, Vietnam's ambition in "industrial 4" and "Vietnam manufacturing" still faces the dilemma of weak foundation and insufficient capacity. Whether in the short run or in the long run, there are many worries in Vietnam.

Taiwanese media said that not long ago, economists predicted that Vietnam's GDP growth this year is expected to reach 8%, but now this assumption may need to add "if Trump does not impose 25% tariffs on Vietnam".

Taiwan Ju Heng network reported on July 22nd, if pushed forward for a month, people may feel that Trump is unlikely to do so, but Trump told reporters in the end of June, Vietnam is the "worst abuser", accounting for the United States cheap, suggesting that Vietnam will impose tariffs.

It is believed that Vietnam is the most likely target for us trade war.

Vietnam's exports to the US increase sharply

According to the statistics, Vietnam's exports to the United States increased sharply in the first 5 months of this year. In the first 5 months of this year, the trade surplus with the US increased considerably compared with the same period last year.

Nomura pointed out in June this year that Vietnam's tariff trade in the first quarter of 2019 was equivalent to 7.9% of GDP. In addition, Vietnam's internal investment in the first 5 months has jumped over the same period last year.

This change has attracted the attention of the United States. In May, the White House listed Vietnam as an observer for the first time, and now imposed high tariffs on Vietnam's steel.

Trump's abrupt face turned out to be puzzled by Vietnamese officials. Some scholars say: "they are very nervous and confused. They do not know what Trump is going to do next."

How long can Vietnam's "good days" last?

Some analysts believe Washington's response to Vietnam's trade practices is entirely normal, and Vietnam's market forces are rising.

According to the report, David Brown, a former US diplomat and Vietnam expert, said that the rapidly industrializing Asian countries were initially addicted to the United States and other major Western trading partners. Then, with the strength of their market forces, the pressure from international trade rules also increased.

Reported that Vietnam's economic growth in the second quarter of this year is the best in Southeast Asian countries. Trump complained that Vietnam occupied the United States and hurt American employment opportunities, but Caner, an economist at Holland commercial bank, believed that Vietnam only benefited from "human nature".

Caner said that Vietnam is the most favorable choice now that Trump has pushed up costs and forced people to try to find ways to avoid them.

The question is, how long will this favorable situation last?

Trump, an international macroeconomic consultancy, estimated that if Hanoi imposed a 25% tariff on Vietnam's imports, its export revenues would be greatly reduced.

According to the report, if Vietnam wants to avoid tariffs, the first step that Vietnam needs to take is to appease the United States, especially the rapid reduction of trade deficit.

Moving to Vietnam and moving back to China

According to Hongkong's South China Morning Post, July 12th:

The Sino US trade war prompted some Chinese shoe factories to move to Vietnam. A shoe factory owner gave up a factory that invested 5 million yuan in just one year.

Zhou Ping has been running a shoe factory in Dongguan, Guangdong, China's manufacturing center. In May 2017, Zhou and another factory owner rented a 1200 square meter factory in Vietnam's Pingyang province to produce accessories for an American clothing brand.

He said: "we thought it was a good idea at that time, because on the surface, Vietnam's factories and manpower were lower than that of Dongguan, and we saw more and more European and American customers in Vietnam. A large number of upstream factories moved there, so we built 4 production lines in Vietnam, employing 110 locals.

However, by October 2018, due to rising costs and "cultural problems", Zhou had to stop and withdraw. Zhou said: "the biggest problem is the efficiency gap between China and Vietnam. Vietnamese workers do not work overtime at all, most of them are unskilled, resulting in low productivity and late delivery time. I believe that the training of skilled workers in Vietnam will not be enough for us and small businesses.

John Wang, another Dongguan shoe factory owner, invested 7 million yuan in a factory in Vietnam in 2015. Two years later, he stopped producing and sublet the workshop. Wang said, as far as he knows, the other 6 Dongguan shoe factory owners have regretted moving to Vietnam and are now planning to "give up".

An executive at a Taiwanese equipment manufacturer said that the company moved many of its production from Guangdong to Hu Zhiming, and found it difficult to recruit and retain employees. "Now, the workforce is hard to stabilize, and the job market is very hot. Vietnamese workers are jumping about." As more companies enter Vietnam, the situation will be even more serious.

Tough enough! Vietnam announced another wage increase.

Nowadays, the turbulence of international trade pattern and tariff preferences gained after Vietnam's entry to CPTPP attract a large number of domestic garment factories. In the first quarter of this year, Vietnam attracted total foreign investment amounting to US $10 billion 800 million, of which half of China's funds accounted for half of it.

When foreign investors flock in to meet the expansion needs of local factories, supply and demand imbalance, Vietnam's "labor shortage" is beginning. Now, Vietnam's wages are not too low, the demographic dividend advantage is gradually weakening.

Recruitment in Hanoi, Vietnam

Tally clerk monthly salary 5 million -650 ten thousand Dong shield (1480 yuan -1924 yuan), do not pack to eat and lodge.
Site construction workers and laborer, daily salary 350 thousand shield shield -40 Wan Dong shield (about 104 yuan -119 yuan) bag live.

In fact, how stressful is it? How much is the bonus interval? Has the wage increase exceeded the affordability?

Let's talk first with data.

According to the data released by the Statistics Bureau of Vietnam, the average monthly income of wage workers in the first quarter of 2019 is estimated to be 6 million 900 thousand shield / month (about RMB2024 yuan / month), an increase of nearly 96 thousand and 700 shield from the previous quarter, an increase of 1 million 50 thousand shield compared with the same period last year. Among them:

Male workers earn 7 million 300 thousand Dong Dong / month (about RMB2142 yuan / month).

The female labor force is 6 million 500 thousand Dong Dong / month (about RMB1907 yuan / month).

The urban labor force is 8 million 200 thousand Dong Dong / month (about RMB2406 yuan / month).

The rural labor force is 6 million Dong Dong / month (about RMB1761 yuan / month).

The average monthly income of paid workers in "industry, level and unit leadership" is 11 million 200 thousand Dong Dong / month (about RMB3287 yuan / month), an increase of nearly 2 million compared with the same period last year.

The group of "high tech professionals" was 9 million 400 thousand Vietnam shield / month (about RMB2758 yuan / month), an increase of nearly 1 million 400 thousand.

The "simple labor" group increased by 844 thousand per month, 4 million 800 thousand Dong Dong / month (about RMB1409 yuan / month).

The average monthly salary of college or above workers is close to 13 million 500 thousand Dong Dong / month (about 3979 yuan / month).

The workers who did not complete primary education were 5 million 100 thousand Dong Dong (about 1503 yuan / month) per month.

Workers who have never been to school have 4 million 300 thousand (about 1267 yuan / month) per month.

The average monthly salary of workers with 3 or more qualifications is 7 million 400 thousand Vietnamese Dong / month (about 2181 yuan / month).

The senior employees from 1 to 3 years were 6 million 200 thousand Dong Dong / month (about 1827 yuan / month).

The new workers have not worked for 1 months, and work 3 million 300 thousand Vietnamese Dong / month (about 972.7 yuan / month) a month.

In addition to the basic wage, social security and overtime costs of workers in Vietnam, as well as the annual minimum wage increase, there are two potential costs to pay attention to.

According to industry sources, the labor law of Vietnam stipulates that enterprises entering the enterprise must make ladder salary, take the government's lowest wage level as the benchmark, the first level salary level is the minimum wage plus 7%, and increase the distance from the second level to an additional level of 5%, and so on.

For example, assuming that the minimum monthly salary in Vietnam is $140 (RMB961 yuan), the first level salary is 149.8 dollars (RMB1027.99 yuan), the second level monthly salary level is 157.3 yuan (RMB1079.46 yuan), the third level is 165.2 yuan (RMB1133.67 yuan), and according to the seniority of employees, the wage level is advanced.

Over the past ten years, the Vietnamese government has raised the minimum wage by 10% per cent per year. When the minimum wage rises, the ladder salary will be kept up. (it means that all employees are paid 15%, which is a terrible expense).

In Vietnam, trade union membership may be a potential trap. For example, the management pays the union membership fee 2% per year based on the total wages of the labour union. The annual minimum wage plus the trapezium salary continues to expand the total salary scale, and the union membership fee keeps rising. This does not include the local social security cost.

According to Yue Tong Hanoi,

In the afternoon of July 11th in Hanoi, after the second round of negotiations, the national wage Council of Vietnam decided that the minimum wage in 2020 would be raised by 5.5%.

Accordingly, since January 1, 2020:

The minimum wage in a region will increase by 240 thousand. The shield will increase from 4 million 180 thousand to 4 million 420 thousand.

The minimum wage in the two category will increase by 210 thousand. The shield will increase from 3 million 710 thousand to 3 million 920 thousand.

The minimum wage in the three category will increase by 180 thousand. The shield will increase from 3 million 250 thousand to 3 million 430 thousand.

The minimum wage in the four category increased by 150 thousand. The shield increased from 2 million 920 thousand to 3 million 70 thousand.

Yin Maoye, Vice Minister of Vietnam's Ministry of labour and the Ministry of social affairs and chairman of the national wage Council, said that the current minimum wage standard has already met more than 95% of the living needs of workers and their families.
After the Vietnam minimum wage standard was raised by 5.5% in 2020, the wages of labourers will basically meet the minimum living security needs of employees.

According to the results of the survey of the Vietnamese Federation of labor unions, the minimum wage standard increased by 5.3% in 2019, and the living conditions of workers have been improved. The minimum wage standards will continue to meet the basic needs of people's lives.