Vietnam feels like China 20 years ago – and it’s bringing the neighbours closer together

Vietnam hosts many of the advantages of the mainland’s industrial boom, and Chinese investors have taken note

When I found Mao Gao in Vietnam, the Chinese national had just finished one of the country’s signature flavoured coffees at a pavement cafe and was getting ready for a smoke.

Unlike most people I met on a late April visit to Bac Ninh, a flat hazy factory city north of the capital Hanoi, Mao was not in a hurry to push on. He was not, that is to say, anxious about his Vietnam investments getting caught in the crossfire of the US-China trade war that has sent tariffs on both sides soaring to the point where most exports make no business sense.

Mao has focused on figuring out Vietnam itself because his plans have nothing to do with the US market. They have everything to do with his home country and the Southeast Asian nation, where he had been stationed for a week.

His take reflects a near-consensus among investors: Vietnam feels like China 20 years ago.

China was, and Vietnam is, an ascendant low-wage export manufacturing hub facing petty corruption, challenges for foreigners without local intermediaries and pressure to build more factory-friendly infrastructure.

“Vietnam shares some of the same fundamentals that powered China’s rise as a manufacturing powerhouse 20 years ago,” said Dan Martin, an international business adviser with Dezan Shira & Associates in Hanoi.

He pointed to low labour costs, political stability and a “clear industrial policy” as three factors that make Vietnam today comparable to China in 2005, despite the Southeast Asian nation’s smaller workforce and greater reliance on supply inputs from abroad.

Vietnam’s 25 years of unusually fast economic growth, excluding the pandemic, on the back of obvious state support for manufacturing also hearken back to the days of the mainland’s early factory boom. So does its quest to shake off low-value textile and garment production in favour of value-added electronics, mostly contracted by foreign multinationals in search of low costs.

Vietnamese infrastructure is improving and vocational education is expanding, Martin has noticed.

When I visited Vietnam in 2024, the big talk was Ho Chi Minh City opening its first metro line after a 12-year wait and plans for a US$8 billion railway linking several northern Vietnamese factory clusters with China.

You hear chatter about better roads and seaports, now all but taken for granted in China, to ship in raw materials and export factory output to end markets.

Businesspeople have an edge in Vietnam today if they see this 20-year comparison, and use it to gauge the outlook for Vietnam’s manufacturing maturity over the next two decades.

“Familiar playbook,” Jack Nguyen summed up when I checked in with the Ho Chi Minh City-based CEO of professional services firm InCorp.

“Investors with China experience have a strategic advantage – similar growth curves, familiar bureaucratic challenges and similar early-stage market dynamics,” he said.

Chinese investors would be best placed to understand the comparison, since they have witnessed their own country’s industrial development.

Mao felt at ease sitting outdoors. Bac Ninh is safe, he said, the city replete with traffic-jammed industrial estates redolent of China’s heady start as a world factory. The tree-lined industrial zone close by features plants run by electronics assembler Foxconn and Chinese component maker Goertek.

Workers in Bac Ninh earn a minimum wage equivalent of just US$175 per month, relatively close to Chinese factory wages in 2005. Nguyen estimates that wages today equal one-third to half of Chinese pay.

Like other Chinese entrepreneurs, Mao is annoyed by red envelope-style petty corruption, but gets it since it was a hallmark of doing business in China at the time. A red envelope with enough cash inside is said to fast track permits.

But he knows quirks of that kind can be smoothed over through savvy local staff, and his first priority was to hire a Vietnamese language interpreter.

Chinese companies not looking to the US market are playing their edge in Vietnam to experiment with start-ups. This might be harder in a more mature economy with higher entry barriers, or in China’s saturated market.

Several everyday hardware stores are owned and operated by Chinese nationals – you can see the Chinese characters on shop fronts in central Bac Ninh, particularly the two city blocks known as Chinatown.

Foreign investors from other parts of Asia gravitate toward managing factories as directed by their headquarters in, say, Tokyo or Singapore.

Mao, a 32-year-old entrepreneur from former chairman Mao Zedong’s hometown in Hunan province, had arrived in Bac Ninh to hire the first Vietnamese staff for his primary company, which anticipates selling medical goods in China.

In the 35-degree heat, Mao explained that he also intends to develop a betel nut business for Vietnamese consumers, drawing on preparation formulas from parts of China where the intoxicating seed is chewed.

Tariffs aside, he expects a boom for Vietnam in the years ahead similar to the one China has enjoyed over the past two decades – especially for Chinese investors. He pointed to President Xi Jinping’s April 14 visit to Hanoi.

China and Vietnam are being cast into the same net today, as US President Donald Trump tries to sweat out Beijing with 100-plus per cent tariffs and threatens 46 per cent duties on imports from Vietnam – one of the highest rates outside China.

Both countries have outsized trade surpluses with the US that have upset the White House, but there is a risk that Washington’s harder line could push the neighbours closer together.

The two countries should work together on infrastructure to “ensure a smooth flow of trade”, the Chinese foreign ministry said in a statement on Xi’s meeting with Vietnamese Prime Minister Pham Minh Chinh last month as the two leaders signed dozens of agreements.