It has been more than a month since Vietnam became the “hardest hit area” of the epidemic, but the epidemic is far from being under control.
As of September 26, according to data from the Ministry of Health of Vietnam, Vietnam has reported 10,011 new confirmed cases of new coronavirus pneumonia, 5,313 of which were found in the community.
The epidemic is still severe, but the government has stated that “Vietnam will not let the epidemic hinder the pace of development”, so Vietnam is gradually moving towards the goal of “safely coexisting with the new coronavirus”. On September 25, Vietnam’s epidemic prevention measures were gradually adjusted to a new stage of epidemic prevention strategy based on the policy of “dealing with the epidemic thoroughly wherever it occurs”. It is understood that Vietnam is experimenting with implementing travel restrictions in a small area, such as a certain street or even a certain house. In addition, Vietnam will gradually relax production and operation activities under the new normal.
During the epidemic, manufacturing companies in Vietnam have been put to the test.
Recently, the four major chambers of commerce representing European, American and Korean investors jointly sent a letter to the Prime Minister of Vietnam, calling for companies to be given a clear timetable for resumption of work, saying that at least one-fifth of manufacturing companies have already Part of the production is transferred to other countries. Many companies with factories in Vietnam have been affected. For example, Nike, which has suspended production in Vietnam for 10 weeks, has lowered its sales forecast for fiscal year 2022, and UNIQLO, a subsidiary of the Japanese retail giant Xunmer Group, has experienced delays in production and logistics in Vietnam. .
Shen Meng, director of Chanson Capital, told reporters that Vietnam’s manufacturing industry mainly accepts manufacturing orders flowing out of China. Now its manufacturing industry has been hit by the epidemic, and those most affected are mainly international companies in Europe and the United States that choose to outsource manufacturing.
Economist Song Qinghui told reporters that Vietnam’s economic growth momentum mainly relies on exports, industrial production and other fields. If the epidemic is not controlled in the future, Vietnam’s economy may suffer as a result. A historic setback.
Recently, there is news that some American companies have begun to promote the relocation of production capacity to China. Can Vietnam’s manufacturing exports continue on its path?
Work was suspended, stock prices plummeted, and the company suffered heavy losses
The severe epidemic situation in Vietnam has made many international investors doing business there miserable.
“After the outbreak, my business can be said to be very bleak. Although areas where the epidemic is not too serious can still start work, the entry and exit of goods is restricted. In the past two or three days, Goods that can leave customs are now delayed to half a month to a month, and orders have naturally decreased.” Zhou Ming, a businessman who sells second-hand mobile phones and mobile phone accessories in Hanoi, Vietnam, told reporters that his business cannot be transferred to domestic sales, so now it can only be regarded as basic maintain lifehood.
Similarly affected businesses are Chinese merchants doing cross-border business between China and Vietnam. Chen Jing, an air fryer businessman, told reporters that he had just opened up the market in Vietnam not long ago, but now that he has encountered the epidemic, he is not only unable to continue to develop new customers, but also cannot go to Vietnam to negotiate contracts, which puts him in a dilemma .
Until now, many local factories have been shut down. Production has stagnated, and those companies that have their factories in Vietnam are most hurt. Recently, the stock prices of many companies have fallen.
On September 24, global sportswear brand Nike lowered its sales forecast for fiscal year 2022. Nike Chief Financial Officer Matthew Friend said on a conference call that they lost 10 weeks of production time in Vietnam and took an average of 80 days to move product from Asia to North America, which was more than before the epidemic. double. Nike executives said the company is moving some production out of Vietnam and using air freight to avoid shipping bottlenecks. After the financial report was released, Nike fell nearly 4% after the U.S. stock market closed. So far, Nike’s stock price has fallen nearly 10% from its August high.
According to statistics, in 2021, more than half of Nike’s footwear products and 30% of its apparel products will be produced by Vietnamese factories. BTIG lifestyle and health analyst Camilo Lyon predicts that the proportion of products from Vietnam will decrease this year.
Also affected are sportswear companies Adidas, Under Armour, and apparel company Abercrombie & Fitch. As of September 26, Adidas’s stock price fell by 3.09%, and Under Armor’s stock price rose slightly by 0.33%. However, both stock prices have declined from the peak a month ago, falling by approximately 5% and 12% respectively. Scott Lipesky, chief financial officer of Abercrombie & Fitch, also pointed out that the situation at the Vietnam factory was beyond “our control.”
The epidemic situation is severe. In order to continue to operate, many large enterprises have implemented the Vietnamese government’s “three local” model (local production, local dining, and local accommodation) to prevent the epidemic. Starting conditions are expensive. In mid-August, Intel’s Vietnam subsidiary added an additional cost of 140 billion Vietnamese dong (approximately 39.77 million yuan) to ensure employees’ accommodation facilities, movement and PCR testing.
In addition, Samsung, which is also located in the “Saigon High-Tech Park” like Intel, has currently reduced its operating rate to 30%. According to some data, if Samsung’s factory in Ho Chi Minh City is shut down for one day, the loss will be approximately VND328.9 billion (approximately RMB 93.44 million). In order to ensure production, Samsung recently stated that it will hire 1,000 workers for its smartphone factory in Bac Ninh Province, Hanoi, Vietnam.
At this moment, Vietnam, which could not bear the economic losses caused by the lockdown, decided to relax epidemic prevention controls and restart economic activities. Since September 21, Hanoi, the capital of Vietnam, has relaxed epidemic prevention measuresControl, lift the social distance measures implemented since July, and allow non-essential service industries such as hairdressing and catering to resume operations.
On September 26, at a video conference on continuing measures to support enterprises, Vu Tien Loc, chairman of the Vietnam International Arbitration Center (VIAC), stressed that Vietnam would not let the epidemic hinder the pace of development, believing that The choice to open markets today is to avoid a diversion of investment in global supply chains.
While Vietnam is eager to restart its economy, the local epidemic situation remains severe.
According to information from the Vietnamese Ministry of Health on September 26, in the past 24 hours, the number of new confirmed cases of new coronavirus pneumonia in Vietnam reached 10,011. As of the evening of the 26th local time, Vietnam had a total of 756,689 confirmed cases of COVID-19, of which 527,926 were cured and 18,584 died.
The number of new products has exceeded 10,000 in consecutive days. In Shen Meng’s view, this situation will have a huge impact on Vietnam’s manufacturing industry. “The impact of the epidemic on Vietnam includes both labor restrictions and logistics restrictions. Vietnam lacks a sufficient market hinterland and relies heavily on the international market. Once restrictions on labor and logistics, especially its logistics, will be serious, It affects the local manufacturing industry,” he told reporters.
Is “Vietnam the world’s factory” in danger?
What has been disrupted by the epidemic are not only the companies that have established local industrial chains, but also Vietnam’s plan to become the “world’s factory”.
Take the American footwear and apparel brands that were most seriously “injured” this time. Their production chains show a high degree of dependence on Vietnam. According to public data, more than half of Nike’s shoes are produced in Vietnam, and about one-third of GAP and Lululemon’s production is in Vietnam. According to data from the American Apparel and Footwear Association, in dollar terms, products made in Vietnam account for almost 1/3 of the U.S. footwear manufacturing industry and 1/5 of the U.S. apparel manufacturing industry.
Before the outbreak, the favor of foreign-funded enterprises allowed Vietnam to enjoy a “bonus period” for its export economy.
According to data released by Vietnam’s General Bureau of Statistics, the country’s trade surplus in 2020 was approximately US$260 billion, a five-year high. In January 2021, it was a record high of 50.5 % export growth has become a new supply force for global consumer demand. Other data show that Vietnam’s total exports in 2020 increased by 6.5% over the previous year, reaching US$281.5 billion, of which more than 70% came from foreign-funded enterprises.
In recent years, manufacturing orders from foreign-funded enterprises have begun to flow to Vietnam, also because Vietnam has its unique advantages. “Vietnam has superior geographical conditions, is adjacent to the South China Sea, has many port cities, and has low local labor costs. It has obvious advantages in developing an export-oriented economy.” Song Qinghui explained to reporters.
In addition, Vietnam’s export boom is also due to the acceptance of orders for the transfer of some Chinese industries.
Shi Zhan, director of the World Politics Research Center of the China Foreign Affairs University, once said in an interview with the media that the manufacturing link transferred to Vietnam is actually the final assembly link, because after the assembly link is the end product , the end products are sold directly to consumers, and many of them are directly exported to the United States, facing the impact of tariffs. If they are transferred to Vietnam, the trade conditions are good. When talking to reporters, businessman Zhou Ming also said that he invested in Vietnam for production because of local policies and tariff convenience.
Vietnam seems to have turned on the engine of economic acceleration through its export-oriented economy. According to the Business Environment Index established by the World Bank, Vietnam’s ease of doing business index has improved significantly in the past ten years, rising from 98th in 2011 to 70th in 2020. Because of this, Vietnam even shouted the slogan “to become the world’s factory.”
However, Vietnam’s “grand” vision has not been favored by the outside world.
Song Qinghui told reporters that although Vietnam has advantages in developing an export-oriented economy, Vietnam’s overall industrial base is weak, the overall labor force and economic level are not high, and they are usually engaged in the industrial chain In the final assembly process, it is still too early to replace China as the “world’s factory”.
Similarly, Shi Zhan, director of the World Politics Research Center of the China Foreign Affairs University, also believes that Vietnam cannot replace China as the “world factory”. The most important reason is that Vietnam’s economic scale is too small. It is difficult to rely on the power of the state to support the heavy chemical industry. He believes that Vietnam, which lacks an independent heavy and chemical industry, will form a nested relationship with China’s supply chain in the future.
Before cooperating with other supply chains, Vietnam, which had tasted the benefits, was already highly dependent on the export-oriented economy. “Vietnam’s potential space for consumption and investment is relatively limited, which makes it easy for Vietnam to rely on exports,” Shen Meng told reporters.
But under the epidemic, Vietnam’s economic model has exposed it to great risks. Recently, the four major chambers of commerce representing European, American and Korean investors jointly sent a letter to the Prime Minister of Vietnam, calling for companies to be given a clear timetable for resumption of work, saying that at least one-fifth of manufacturing companies have transferred part of their production to other countries.
“Vietnam’s economy has grown rapidly after reform and opening up, and foreign investment has made an important contribution to its growth. However, at the same time, Vietnam’s economic growth also relies heavily on foreign investment and import and export, and its economic prospects are not good. “Clear,” Song Qinghui pointed out to reporters that at present, heavy reliance on foreign investment has become the biggest concern hindering the healthy development of Vietnam’s economy. Once foreign investment withdraws or transfers from Vietnam, the bright figures of Vietnam’s economy will be eclipsed.
��The economy’s shiny numbers will be eclipsed.
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