Vietnam’s Lang Son province has emerged as a promising location for investors looking to diversify or supplement their manufacturing in China. Manufacturing centers in Vietnam and China have different strengths and often play complementary roles in the production process. Vietnam Briefing introduces Lang Son and Chinese Guangxi and the factors to consider when planning a supply chain change.
The COVID-19 pandemic and the trade war between the United States and China have disrupted global supply chains, forcing companies to diversify production or seek alternative suppliers while protecting themselves from raw inputs. This has been further accentuated as China’s global factory faces lockdowns and lockdowns due to a zero covid approach.
While several countries have benefited from such diversification, Vietnam, which borders China, offers immense advantages as the country is renowned for its political stability, convenient location, and business-friendly policies.
In this context, the province of Lang Son, in the north of Vietnam, is becoming an attractive place for investors wishing to supplement or diversify their business operations from China.
To illustrate this, we look at Lang Son and Guangxi in China, both of which have significant growth potential, although they have distinct characteristics that should be considered.
An Introduction to Lang Son Province
Located in the mountainous regions of northeast Vietnam, Lang Son Province covers an area of 8,310 square kilometers and borders one of Vietnam’s economic centers, Quang Ninh Province to the west and Guangxi to the north. -is. Lang Son is known as a hub for cross-border trade in the North and a gateway that connects Vietnam with China’s Guangxi and the wider ASEAN region.
According to the Lang Son People’s Committee, due to its railway network and road network linking Vietnam’s economic hubs, the province has become a cargo transshipment gateway to the Chinese market and ASEAN countries.
It has approximately 790,000 inhabitants and its demographics are dynamic with different ethnic groups inhabiting the province.
Lang Son’s economy has shown notable signs of growth, growing by 8-9% for the period 2011-2018 and an additional 6-7% expected from 2022. The three main industries that make up the economy of the province include:
It should be noted that Lang Son performed well on the Provincial Competitiveness Index (PCI), ranking 36th, up 13 places from 2020 with an overall competitive point of 63.92. Lang Son PCI scores have improved significantly year over year (lower scores indicate improvement):
Lang Son’s sub-index scores are no less impressive, with the majority of criteria above 6, including the four criteria of cost of time, informal changes, proactivity and public order:
|Law and order||7.39|
The performance of Lang Son province cannot be underestimated as according to the official report, the 2021 (PAR INDEX) of Lang Son reached 87.11%, standing at the 23rd position out of 63 provinces, up 13 places compared to 2020, proving the transparency of the province in terms of legal aspects.
The province has risen to position itself as Vietnam’s next investment hub. Lang Son currently enjoys more than 40 FDI projects with total investment capital amounting to US$240 million. The Lang Son authority recently approved a decision promoting 37 investment projects, calling for an additional investment of $1.9 billion for the period 2019-2025.
In 2019, Lang Son held an investment promotion conference, namely “Lang Son – a successful destination for investors” on ensuring the most transparent and favorable business environment for investors. According to the Planning and Investment Department, Lang Son provides tax reductions and exemptions, as well as business-friendly ground rent, in accordance with government laws.
In terms of infrastructure, the upcoming Dong Dang (Lang Son province) – Tra Linh (Cao Bang province) Lang Son highway (115 km long) as well as the improvement of the 4B highway connecting Quang province Ninh can be a strong impetus for the province’s logistics industry and supply chain, along with the cargo transshipment site project, attracting new investment plans.
Remarkably, Lang Son province is the destination chosen for the construction of three wind power plants by the German company BayWa re in three districts: Van Quan, Cao Loc and Loc Binh.
Lang Son is also known for its vast economic zones. The Dong Dang-Lang Son Border Economic Zone covers an area of 394 km2, and two other industrial parks cover an additional 761.7 hectares. It is expected that another 10 industrial parks will be established by 2030.
With a business-friendly environment and the geographical advantage of proximity to China, Lang Son bodes well to become an attractive destination for businesses seeking a location.
An introduction to Guangxi
Located in the southern part of China, Guangxi is bordered by Guangdong province to the east, Yunnan province to the west, and Vietnam to the southwest.
Guangxi is home to the famous Huashan Cliff Paintings, a UNESCO World Heritage Site.
While Guangxi is among China’s least developed provinces, it has great potential for growth as it has partnered with two regional initiatives, including the Greater Mekong Sub-Region (GMS) Economic Cooperation Program and the PRC-Association of Southeast Asian Nations Free Trade Area.
In terms of infrastructure, Guangxi benefits from both deep-sea seaports and land ports on its international borders. The region also has an extensive highway network that connects the seaport of Guangxi with Yunnan, Guizhou and its land ports on the border with Vietnam.
The region’s Pilot Free Trade Zone (FTZ) has attracted foreign investment. As many as 194 foreign-funded enterprises were established, 40 of which were from the pilot free zone in 2019. Contractual foreign investment amounted to 2.68 billion US dollars in 2019, an increase of 56.4% from one year to the next. The Guangxi Pilot Free Zone is expected to become a world-class economic playground that promotes China-ASEAN trade partnership.
Guangxi’s economy depends on three major areas, each focusing on specific industries:
- Nanning area: modern service sectors such as finance, smart logistics, culture and media;
- Qinzhou port area: Industries such as port logistics, international trade, environmentally friendly chemicals, components for new energy cars; and
- Chongzuo area: Cross-border trade/logistics/finance/tourism/labour service.
According to government statistics, in 2021, profits of Guangxi industrial enterprises reached 106.5 billion yuan, up 41.2 percent year on year.
Lang Son and Guangxi – Decide your destination China+1
It should be noted that in February, the leaders of the northern Vietnamese provinces of Cao Bang, Lang Son, Quang Ninh and Ha Giang signed a memorandum of understanding with the authorities of Guangxi on future partnerships for the period 2022- 2026. This will create a favorable environment for companies operating in Guangxi looking to complete their business operations in Vietnam. As mentioned earlier, as China and Vietnam are at different stages of development, the trade relationship is complementary rather than competitive.
Lang Son province is also Vietnam’s first point in the Nanning-Lang Son-Hanoi-Hai Phong and Nanning-Lang Son-Hanoi-Ho Chi Minh City-Moc Bai economic corridors, which facilitates business operations for foreign investors. , making the province an attractive option for a China+1 site.
With abundant and competitive labor rates as well as a stable political environment, Lang Son Province in Vietnam is a promising location to consider for companies looking to diversify their operations from manufacturing hubs in China.
Vietnam Briefing is produced by Dezan Shira & Associates. The company assists foreign investors throughout Asia from offices around the world, including Hanoi, Ho Chi Minh City and Da Nang. Readers can write to [email protected] for more support on doing business in Vietnam.
We also maintain offices or have alliance partners who assist foreign investors in Indonesia, IndiaSingapore, The PhilippinesMalaysia, Thailand, Italy, Germany and the United States, in addition to practices in Bangladesh and Russia.