Coronavirus News Asia

Why ‘Made in Vietnam’ won’t replace ‘Made in China’

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Now that Vietnam appears to have won its health war against Covid-19 after recording zero deaths and winning international praise for its crisis management, speculation is rising the nation could also be an economic winner of the pandemic.

According to Vietnamese sources, there is widespread anticipation that the country will benefit from America’s moves to economically “decouple” from China by moving supply chains out of China and into other regional countries including Vietnam.

In early May, regional media reported that US tech giant Apple began producing 3-4 million units – or about 30% for the quarter – of its AirPod earphones in Vietnam in April, a sign that the firm is relocating some of its supply chains away from China. 

The report noted that many of Apple’s suppliers, including Foxconn and Pegatron, and iPad maker Compal Electronics, are also expanding operations in Vietnam. Inventec, an AirPods assembler, is reportedly building a plant in Vietnam.

The coronavirus crisis has escalated superpower tensions, with US President Donald Trump ratcheting up anti-China sentiment even more than normal, including by spreading conspiracy theories that the virus originated in a Wuhan biological lab rather than a wet market.

Earlier this month, Trump told Fox News that “we could cut off the whole relationship”, a threat that gained steam this week with the US Senate unanimously approving still pending legislation that if passed would force Chinese companies to give up their listings on US stock exchanges.

On May 18, it was reported that US officials are drawing up plans for a major push to compensate US businesses that bring back foreign operations, including a proposed US$25 billion “reshoring fund.” The Japanese government also has plans to pay its businesses to bring operations home from China.

Moreover, Trump has also recently threatened to introduce new tariffs on top of the current 25% tax on some $370 billion worth of Chinese goods exported to the US, which will pinch US firms still active in Chinese supply chains. 

Reports suggest that the Trump administration is working to create a new alliance of “trusted partners” known as the “Economic Prosperity Network” to actualize decoupling from China.   

US President Donald Trump holds a Vietnamese flag as Vietnam’s Prime Minister Nguyen Xuan Phuc (L) waves a US flag upon their arrival for a meeting at the Government Office in Hanoi on February 27, 2019. Photo: Saul Loeb/AFP

Speaking in late April, Secretary of State Mike Pompeo insinuated that Vietnam would be part of this alliance when he said he was in talks with Hanoi as well as Australia, India, Japan, New Zealand and South Korea on “how we restructure…supply chains to prevent something like this from ever happening again.”

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