If the geopolitical chaos of the past five years has taught multinationals anything, it’s that the only stable supply chain is a diversified one. Although China remains the world’s manufacturing superpower, its status among major western companies took a serious knock during the pandemic. Its government’s zero-Covid policy meant factories and logistics operations were at a standstill long after other major economies had loosened their own restrictions.
Companies such as Apple (US:AAPL) and Volkswagen (DE:VOW3) were still complaining of product shortages at the start of last year. Bloomberg suggests that the US tech giant doubled its production of iPhones in India as a result. Similar moves have become so common that they’ve earned their own name: 'China plus one.' Companies pursuing these strategies don’t quit the country altogether – instead they build out their manufacturing capabilities in neighbouring nations.
Vietnam has been a major beneficiary of this shift: foreign direct investment was up 32 per cent last year to nearly $37bn (£28bn). Meanwhile, the country’s export revenues rose 14.5 per cent year on year in the first half to $190bn and industrial production increased by almost 11 per cent. Given these factors, it’s not surprising that Vietnam’s GDP growth is projected to be around 6 per cent this year – a prospect that probably sounds enticing to investors from more static, developed economies.