In the context of economic globalization, manufacturing enterprises are constantly seeking optimal production bases. China, having been the “world’s factory” for many years, now faces challenges such as rising labor costs. Meanwhile, Vietnam is becoming an attractive alternative due to its geographical location, labor costs, and policy advantages. This article will delve into the operational cost differences between investing in factories in Vietnam and China, highlighting Vietnam’s advantages, and provide detailed reference data for investors.

1.Comparison of Major Operating Cost Factors and Analysis of Vietnam’s Advantages

1.1 Labor Costs

China:

• In 2023, the average monthly wage in the manufacturing sector in Suzhou (a second-tier manufacturing city) is approximately 4,800 RMB (about 700 USD) ·
• Minimum wage standard: Using Suzhou as an example, in 2023 it is 2,280 RMB/month (about 332 USD)

Vietnam:

• In 2023, the average monthly wage in the manufacturing sector in Hai Phong (a second-tier manufacturing city) is approximately 4,800,000 VND (about 202 USD) ·
• Minimum wage standard: Using Hai Phong as an example, in 2023 it is 4,180,000 VND/month (about 176 USD)

Analysis of Vietnam’s Advantages:

(1) Significant labor cost advantage, with average wages only about 28% of China’s

(2) Abundant young labor force, with over 60% of the population under 35 years old

(3) Rapid improvement in worker skills, with the government heavily investing in vocational education

(4) Relatively flexible labor laws, with more lenient overtime restrictions compared to China

Data sources: China National Bureau of Statistics, Vietnam General Statistics Office

1.2 Land and Factory Rental Costs

China:

• First-tier city industrial land prices: 800-1,500 RMB/m²/year
• Second and third-tier city industrial land prices: 300-700 RMB/m²/year

Vietnam:

• Industrial zones around Hanoi and Ho Chi Minh City: 60-120 USD/m²/year
• Industrial zones in other regions: 30-80 USD/m²/year

Analysis of Vietnam’s Advantages:

(1) Land costs significantly lower than China, especially compared to first-tier Chinese cities

(2) Government offers various preferential policies, such as long-term land lease rights and tax reductions

(3) Continuous improvement of industrial park infrastructure, such as Que Vo Industrial Park in Bac Ninh Province and Vietnam-Singapore Industrial Park in Binh Duong Province

Data source: JLL Asia Pacific Industrial Property Market Report 2023

1.3 Energy Costs

China:

• Average industrial electricity price: 0.65-0.85 RMB/kWh
• Average industrial water price: 4-6 RMB/m³

Vietnam:

• Average industrial electricity price: 1,500-2,500 VND/kWh (approximately 0.06-0.11 USD/kWh)
• Average industrial water price: 10,000-15,000 VND/m³ (approximately 0.43-0.64 USD/m³)

Analysis of Vietnam’s Advantages:

(1) Electricity costs slightly lower than China, but attention should be paid to power supply stability

(2) Abundant water resources, with relatively low costs

(3) Government is promoting energy infrastructure construction, such as the 2020-2030 Power Development Plan

Data sources: China National Development and Reform Commission, Vietnam Electricity Group (EVN), Vietnam Water Resources Bureau

1.4 Tax Costs

China:

• Standard corporate income tax rate: 25%
• Standard VAT rate: 13%

Vietnam:

• Standard corporate income tax rate: 20%
• Standard VAT rate: 10%

Analysis of Vietnam’s Advantages:

(1) Overall tax rates lower than China, reducing the burden on enterprises

(2) Various tax incentive policies: o High-tech enterprises can enjoy a preferential tax rate of 10% o Some industries can enjoy tax exemption for up to 4 years, followed by 9 years of 50% reduction

(3) The 2020 Investment Law further expanded the scope of tax incentives for foreign-invested enterprises

Data sources: China State Administration of Taxation, Vietnam Ministry of Finance

1.5 Logistics Costs

China:

• Total logistics costs as a percentage of GDP in 2022: 13.8%
• Container port throughput: 285 million TEUs (2022)

Vietnam:

• Total logistics costs as a percentage of GDP in 2022: 16.8%
• Container port throughput: 24 million TEUs (2022)

Analysis of Vietnam’s Advantages:

(1) Strategic geographical location: close to major shipping routes, facilitating exports

(2) Continuous improvement of port facilities: o 44 seaports, including 17 international seaports o Major ports: Hai Phong Port (North), Da Nang Port (Central), Saigon Port (South)

(3) Bordering China, facilitating synergy with Chinese supply chains

(4) Government is implementing the “2020-2030 Transportation Development Strategy,” which will significantly improve logistics efficiency

Data sources: China National Bureau of Statistics, Vietnam Maritime Administration, Vietnam Ministry of Transport

1.6 International Trade Environment

China:

• Participating in 19 free trade agreements

Vietnam:

• Participating in 15 free trade agreements, including RCEP, CPTPP, etc.

Analysis of Vietnam’s Advantages:

(1) RCEP and CPTPP membership provides extensive market access

(2) China-ASEAN Free Trade Area provides additional advantages for Chinese enterprises

(3) Free Trade Agreement with the EU (EVFTA) opens up the European market

(4) Trade agreement network helps reduce tariff costs and expand export markets

Data sources: China Ministry of Commerce, Vietnam Ministry of Industry and Trade

2.Special Regional Investment Considerations in Vietnam

Given Vietnam’s unique geographical location and regional differences, investors should pay special attention to the following points when choosing specific investment locations:

2.1 Northern Region (centered on Hanoi)

(1) Chinese Border Advantage: Close to China’s Guangxi and Yunnan, facilitating synergy with Chinese supply chains

Considerations: Need to consider customs clearance efficiency at border crossings and changes in border trade policies

(2) Hai Phong Port Advantage: The largest deep-water port in the north, with high container throughput

Considerations: Assess the level of port facility modernization and future expansion plans

(3) Industrial Park Selection: Such as Que Vo Industrial Park in Bac Ninh Province, Deep C Industrial Zone in Hai Phong

Considerations: Examine the completeness of park infrastructure and level of supporting services

2.2 Central Region (centered on Da Nang)

(1) East-West Economic Corridor Hub: Connecting Laos and Thailand, serving as a gateway to inland Southeast Asia

Considerations: Focus on cross-border transport policies and infrastructure construction progress

(2) Emerging Industrial Zone Advantages: Such as Hoa Khanh Industrial Zone in Da Nang, Chu Lai Open Economic Zone in Quang Nam Province

Considerations: Evaluate the strength of government support policies for the central region

(3) Tourism Industry Driving Effect: Consider the impact of tourism on the labor market and service industry support

Considerations: Note the impact of seasonal factors on labor supply

2.3 Southern Region (centered on Ho Chi Minh City)

(1) Economic Center Advantage: Vietnam’s most economically developed region with great market potential

Considerations: Consider higher operating costs and intense competitive environment

(2) Mekong Delta Advantage: Base for agricultural product processing and aquatic product exports

Considerations: Pay attention to the impact of environmental protection policies on manufacturing

(3) Mature Industrial Zone Selection: Such as Nhon Trach Industrial Zone in Dong Nai Province, Vietnam-Singapore Industrial Park in Binh Duong Province

Considerations: Assess land prices and availability, consider future expansion space

2.4 Cross-Regional Considerations

(1) Transportation Infrastructure: Consider the distance to major ports and airports, and the level of road and rail network development

Considerations: Focus on the implementation progress of the “2020-2030 Transportation Development Strategy”

(2) Labor Market Differences: Labor costs and skill levels vary across regions

Considerations: Evaluate local educational resources and vocational training facilities

(3) Industrial Cluster Effects: Consider synergies with upstream and downstream industries

Considerations: Analyze the completeness and supporting capabilities of local industrial chains

(4) Power Supply Stability: Power supply situations differ across regions, potentially affecting production stability

Considerations: Understand local power grid upgrade plans and backup power solutions

(5) Environmental Policy Differences: Control intensity for polluting industries may vary across regions

Considerations: Review local environmental protection regulations and future environmental plans

(6) Local Government Efficiency: Service efficiency and support levels may vary among local governments

Considerations: Establish connections with local investment promotion centers to understand administrative efficiency

(7) Natural Disaster Risks: Consider the impact of typhoons, floods, and other natural disasters

Considerations: Assess the ability of the factory site to withstand natural disasters and develop emergency plans

By comprehensively considering these regional characteristics and considerations, investors can better choose investment locations that suit their needs, fully utilize Vietnam’s locational advantages, while avoiding potential risks. Before making the final decision, it is recommended to conduct in-depth on-site inspections and detailed feasibility studies.

4.Investment Implementation Guide Information

4.1 Vietnamese Government Agencies

Ministry of Planning and Investment (MPI) — Responsibility: Formulating investment policies and issuing investment certificates

• Website: www.mpi.gov.vn
• Phone: +84 80 43485

Ministry of Industry and Trade (MOIT) — Responsibility: Industrial and trade policies, managing industrial zones

• Website: www.moit.gov.vn
• Phone: +84 24 22202222

Ministry of Natural Resources and Environment (MONRE) — Responsibility: Environmental impact assessment approval

• Website: www.monre.gov.vn
• Phone: +84 24 37956868

General Department of Taxation — Responsibility: Tax policies and management

• Website: www.gdt.gov.vn
• Phone: +84 24 39741161

General Department of Vietnam Customs — Responsibility: Import-export management and tariffs

• Website: www.customs.gov.vn
• Phone: +84 24 39440833

4.2 Chinese Institutions in Vietnam

Economic and Commercial Office of the Chinese Embassy in Vietnam — Responsibility: Providing investment consulting and assistance to Chinese enterprises

• Website: vn.mofcom.gov.cn
• Phone: +84 24 38315289

Economic and Commercial Office of the Chinese Consulate General in Ho Chi Minh City — Responsibility: Assisting Chinese enterprises investing in southern Vietnam

• Website: hochiminh.mofcom.gov.cn
• Phone: +84 28 38292463

4.3 Investment Consulting Agencies

Foreign Investment Agency (FIA) — Service: Providing information and support to foreign investors

• Website: fia.mpi.gov.vn
• Phone: +84 24 37759271

Vietnam Industrial Zone Management Authority — Service: Industrial zone information and management

• Website: www.hepza.hochiminhcity.gov.vn (Ho Chi Minh City example)
• Phone: +84 28 38290033

4.4 Site Selection and Operating Cost Calculation Related Processes

When selecting sites and calculating operating costs, investors need to go through the following key processes:

Preliminary Site Selection

• Contact Vietnam Industrial Zone Management Authority or local investment promotion centers
• Obtain basic information and preferential policies for potential industrial zones

On-site Inspection

• Arrange meetings with industrial zone management committees
• Inspect infrastructure, transportation convenience, surrounding facilities, etc.

Cost Estimation

• Land lease costs: Inquire about specific rental fees and payment terms from industrial zone management committees
• Labor costs: Consult local labor departments or human resource companies to understand wage levels and social insurance contribution standards
• Water and electricity costs: Inquire prices from industrial zone management committees or local suppliers
• Logistics costs: Contact logistics companies for quotations

Environmental Impact Assessment

• Engage qualified environmental assessment agencies for evaluation
• Submit environmental impact reports to MONRE or provincial environmental departments

Tax Incentive Evaluation

• Consult the General Department of Taxation or local tax bureaus to understand available tax incentive policies
• Engage tax consulting companies for detailed assessments

Investment Certificate Application

• Submit investment applications to MPI or provincial investment departments
• Prepare required documents, including investment plans, financial capability proofs, etc.

Factory Construction Planning

• Engage local architectural design and construction companies
• Apply for construction permits from local construction departments

Customs and Import-Export

• Contact the General Department of Vietnam Customs to understand procedures and tariffs for importing equipment and raw materials
• Consider applying for bonded zone or export processing zone status

Recruitment and Training

• Contact local human resource companies or recruit directly
• Develop training plans, potentially seeking cooperation with local vocational training institutions

Business License Application

• Apply for business licenses from local business registration offices
• Prepare necessary documents such as company charters, lease contracts, etc.

Throughout the entire process, it is recommended to engage experienced legal and financial advisors to ensure smooth procedures and full utilization of various preferential policies. Meanwhile, maintain close contact with the Economic and Commercial Office of the Chinese Embassy in Vietnam to obtain timely support and latest information.