Vietnam embraces new wave of investments: HSBC exec

Joon Suk Park
By Joon Suk Park
Wed, November 6, 2024 | 3:44 pm GMT+7

Embracing new investment flows is in the interest of Vietnam and will support the country’s advancement higher up in the value-added ladder across industries and sectors, writes Joon Suk Park, head of international subsidiary banking, wholesale banking, HSBC Vietnam.

Joon Suk Park, head of international subsidiary banking, wholesale banking, HSBC Vietnam. Photo courtesy of the bank.

Joon Suk Park, head of international subsidiary banking, wholesale banking, HSBC Vietnam. Photo courtesy of the bank.

FDI is the tag word defining Vietnam’s success today and an essential source of fresh capital upholding the country’s aspirations to expand and grow. Hence, securing sustainable flow of FDI into Vietnam is a quintessential agenda requiring firmness of attention.

The latest trend observed reveals the prowess of the Greater China markets’ investment flows across diverse sectors and industries. Mixue, a leading bubble tea and ice cream parlor brand, has topped Vietnam’s market with over 1,000 stores; global electronics players such as Luxshare, Geortek, Foxconn, Pegatron, and Compal continue to invest heavily into the ecosystem.

Hualian Ceramic, a leading household ceramics company, is looking to create a ceramic valley; Sailun Group has made commitments for more investments into their tire manufacturing factory; Lotus Pharmaceuticals has made acquisitions to expand into the pharma industry while Deli Stationery (stationery), Sunwoda (battery), and United Imaging (healthcare) are all making strong inroads into Vietnam.

Vietnam, over the decades, has grown to become tightly intertwined with the global supply chain, advancing into higher value electronics sector and witnessing seven times growth in exports since 2007, 70% of which are driven by FDI companies. The leading FDI provider over the years has no doubt been South Korea, with giant names like Samsung, LG, Hyundai, Lotte, etc. whilst Singapore and Japan have also joined the competition with great success.

However, the dynamics of FDI inflow and the investor landscape are shifting since the second half of 2023 and more evidently coming into 2024. Greater China market flow and predominantly led by mainland China is increasingly gaining traction. This is on the back of extensive co-mingling of the two economies nudged by the ongoing shift and re-jigging in global supply chain.

Trade between the two markets have grown 10-fold from 2007, Vietnam now plays a pivotal role in the downstream segment of China’s manufacturing supply chain, and from a newly registered FDI angle, the Greater China corridors of mainland China, Hong Kong and Taiwan are collectively contributing to 60% of the aggregate flow compared to 38% in 2022.

Additionally, as of first half of 2024, close to 50% of all newly registered FDI investments from the Singapore corridor are also in fact attributed to mainland China and Taiwan investments.

 China’s stationery manufacturer Deli Group breaks ground on a $270 million plant in Hai Duong, northern Vietnam, on September 28, 2024. Photo courtesy of Tuoi Tre (Youth) newspaper.

China’s stationery manufacturer Deli Group breaks ground on a $270 million plant in Hai Duong, northern Vietnam, on September 28, 2024. Photo courtesy of Tuoi Tre (Youth) newspaper.

Taiwan, whilst quantum of investment is shadowed by mainland China, continues to expand and deepen into Vietnam as a means to relocate and diversify their supply chains.

Taiwan’s 2016 New Southbound Policy has helped to boost the investment flow and Vietnam’s multiple bilateral and regional FTA pacts have catalyzed those global Taiwanese manufacturers to leverage on Vietnam as a cost-effective platform exporting to U.S., Europe as well as intra-Asia.

Today, Vietnam is an important and strategic manufacturing outpost for the likes of Foxconn, Compal and Pegatron. Hong Kong is a blend of investors from Hong Kong Corporates to mainland China firms using Hong Kong as a launch platform to invest into Vietnam.

So why is the Greater China and particularly the mainland China flow of FDI expanding? Based on HSBC Global Research, there are several factors.

Firstly, China today stands at the core of global trade where protectionism measures are growing. China’s annual export volume amount to an overwhelming $3.5 trillion outbeating the U.S. ($2 trillion) and Germany ($1.7 trillion). Chinese components are increasingly becoming important for global supply chain. Hence from a global trade corridor perspective, nine out of the 20 key global trade relations are China centric and only four for the U.S. and Europe each.

The implication for ASEAN region is a growing trade deficit with China but moreso coming from supply chain re-jigging taking place. ASEAN markets are actually benefiting from import of cheap inputs from China to become competitive and in turn to achieve trade surplus position with the rest of the world. Vietnam is a classic case and one of key beneficiaries.

Secondly, the investment flows are also a response to growing domestic market backed by the growing middle-income class within the 100 million population where media age is 30 and 70% are working population. China’s No. 1 EV player, BYD’s recent entry into the market is a testimony.

Lastly, fundamentals continue to remain strong and attractive. Manufacturing wages is less than half of that in mainland China and the second lowest in ASEAN behind Philippines, electricity price is the second lowest in ASEAN just behind Indonesia, diesel price is the second lowest only behind Malaysia.

There is significant progress in executing both bilateral and regional FTAs, and in connection FDI Regulatory Restrictiveness Index indicates Vietnam as the most open economy just behind Singapore in the region, whilst the 20% statutory corporate income tax rate reveal comparative advantage against markets such as China, Philippines, Malaysia and Indonesia.

Greater China corridor is and will continue to be rich source of investment buttressing and fueling the country’s growth. FDI flows from other corridors will also contribute. Yet structural headwinds remain. The pace at which these challenges are unraveled will determine the brightness of Vietnam’s future limelight.

However, the window of opportunity arising from the global supply chain shift happens to be open to all and not just for Vietnam. The neighboring markets are not bystanders. There are pro investor actions, related laws and decrees as well as measures being implemented by Thailand, Malaysia, Philippines and Indonesia to attract further FDI. Competition is high.

For Vietnam, criticality lies in advancing forward and climbing further up the value-added chain and also to consummate domestic value-added contents. Exports of consumer electronics remain strong yet Vietnam is behind in global integrated circuits segment, and there are insufficient skilled local technicians to attract hi tech manufacturing investments (albeit the government has recently laid out the roadmap 2050 specifically for the semiconductor sector). But also in other sectors including transport and logistics, infrastructure gap and entailing high logistics cost may weigh down on investment decisions.

Green energy and the transition journey require further pace of implementation and digitalization to streamline trade processes will facilitate the ease of business. Concurrently, the ongoing progressive touch to the overarching regulatory framework supporting foreign investments as well as foreign enterprises operating in Vietnam would remain conducive to maintaining Vietnam’s course to receive sustainable investment flows now and into the future.

The message is clear and the opportunity is clearer. Vietnam is favorably positioned to reap the benefit of the global trade diversion and the supply chain alterations. Embracing new investment flows is in the interest of Vietnam and will support the country’s advancement higher up in the value-added ladder across industries and sectors.

HSBC in Vietnam remains an active advocate and steadfast champion of the Vietnam growth story. The strength of the bank’s international network not only enables to support the FDI investors in making successful entry into the market and navigating the various challenges, but also to support the digitalization, working capital optimization and ESG transition needs.

Partnering up with Vietnam corporates and facilitating the FDI flow require a dynamic approach. The presence of a Greater China Desk is a direct response to the shifting trends in FDI flow and reflects the adaptable stance of a global international bank.

Comments (0)
  • Read More
What makes NobleGo - Vietnam’s first home-bidding livestream platform - so notable?

What makes NobleGo - Vietnam’s first home-bidding livestream platform - so notable?

NobleGo – Vietnam’s pioneering AI-powered livestream real estate bidding platform developed by Sunshine Group – has completed its first 20 livestream sessions.

Real Estate - Tue, September 16, 2025 | 4:53 pm GMT+7

Japanese retailer Aeon to debut another northern Vietnam shopping mall by end-2026

Japanese retailer Aeon to debut another northern Vietnam shopping mall by end-2026

Japanese-backed Aeonmall Vietnam is ramping up construction on its Aeon Mall Ha Long project in Quang Ninh province, home to Ha Long Bay, with an aim to open it to the public by end-2026.

Industries - Tue, September 16, 2025 | 3:54 pm GMT+7

Hanoi terminates Vinaxuki auto plant project, repurposes land for commercial complex

Hanoi terminates Vinaxuki auto plant project, repurposes land for commercial complex

A long-stalled automotive manufacturing project by Xuan Kien Auto JSC (Vinaxuki) has been officially terminated by Hanoi authorities, and the reclaimed land in Phuc Thinh commune will be repurposed for a new commercial and service complex.

Industries - Tue, September 16, 2025 | 2:44 pm GMT+7

Central Vietnam province reviews investment proposal for thermal power project after Thai EGATi pullout

Central Vietnam province reviews investment proposal for thermal power project after Thai EGATi pullout

Authorities in the central province of Quang Tri are evaluating a proposal from Power Generation JSC 1 (EVNGENCO 1), a subsidiary of state utility Vietnam Electricity (EVN), to take over the Quang Tri thermal power plant project, following the withdrawal of Thai investor EGATi.

Energy - Tue, September 16, 2025 | 1:44 pm GMT+7

Amata to sell stakes worth $46 mln in Vietnam units to Novaland-tied buyers

Amata to sell stakes worth $46 mln in Vietnam units to Novaland-tied buyers

Amata VN, the Vietnam arm of Thailand’s leading industrial park developer Amata, has approved a plan for its subsidiary Amata City Long Thanh Urban JSC (ACLT) to sell its remaining 51% stakes in two entities to local developer Novaland-linked buyers.

Real Estate - Tue, September 16, 2025 | 12:19 pm GMT+7

Vietnam already meets FTSE's criteria for stock market status upgrade: Finance Minister

Vietnam already meets FTSE's criteria for stock market status upgrade: Finance Minister

Vietnam has fulfilled the criteria for a stock market status upgrade by FTSE Russell through reforms aimed at facilitating foreign investment inflows into its market, said Minister of Finance Nguyen Van Thang.

Economy - Tue, September 16, 2025 | 9:36 am GMT+7

Banks should be allowed to distribute, invest in mutual fund certificates: Vietnam's finance ministry

Banks should be allowed to distribute, invest in mutual fund certificates: Vietnam's finance ministry

The Ministry of Finance is proposing a key reform that would allow commercial banks to invest in and distribute mutual fund certificates, as part of a broader plan to restructure the investor base and foster the development of Vietnam’s fund management industry.

Finance - Tue, September 16, 2025 | 8:00 am GMT+7

E-commerce boom a major driver of Vietnam's packaging paper industry growth

E-commerce boom a major driver of Vietnam's packaging paper industry growth

Vietnam's paper packaging industry is entering a period of strong growth, with an average annual growth rate forecasted at 10% until 2030.

Companies - Mon, September 15, 2025 | 10:20 pm GMT+7

Vietnam needs support from UK in developing international financial center: Deputy PM

Vietnam needs support from UK in developing international financial center: Deputy PM

Permanent Deputy Prime Minister Nguyen Hoa Binh has called on the UK and the City of London to continue supporting and accompanying Vietnam in promoting and introducing its international financial center (IFC).

Finance - Mon, September 15, 2025 | 10:12 pm GMT+7

Vietnam enforces 8% capital adequacy ratio for banks from Sept 15

Vietnam enforces 8% capital adequacy ratio for banks from Sept 15

Commercial banks and foreign bank branches in Vietnam must maintain a minimum capital adequacy ratio (CAR) of 8%, including at least 4.5% in Tier 1 core capital and 6% in Tier 1 capital, starting from September 15.

Banking - Mon, September 15, 2025 | 10:04 pm GMT+7

Tool for wood traceability management debuts in Vietnam

Tool for wood traceability management debuts in Vietnam

The Vn-WoodID application has been officially launched in Vietnam, becoming a key tool contributing to wood traceability.

Companies - Mon, September 15, 2025 | 10:00 pm GMT+7

Sun Group, US Embassy foster aviation-hospitality cooperation

Sun Group, US Embassy foster aviation-hospitality cooperation

Sun Group, in collaboration with the US Embassy in Vietnam, hosted the US – Vietnam Aviation Partnership Roundtable on September 12, bringing together 15 leading American corporations in aviation, technology, and financial services, opening up opportunities to position Phu Quoc as a new aviation and tourism hub in the region.

Companies - Mon, September 15, 2025 | 9:54 pm GMT+7

Vietnam tops Thai giant SCG’s overseas markets with 9% revenue contribution in H1

Vietnam tops Thai giant SCG’s overseas markets with 9% revenue contribution in H1

Vietnam remained the largest overseas market for Thailand’s Siam Cement Group (SCG) in the first half of 2025, contributing 9% of consolidated sales.

Companies - Mon, September 15, 2025 | 8:10 pm GMT+7

Central Vietnam to have new airport Mang Den

Central Vietnam to have new airport Mang Den

Procedures to adjust Vietnam's airport system planning, including the addition of Mang Den Airport in central Vietnam, are being proceeded, according to the Ministry of Construction.

Infrastructure - Mon, September 15, 2025 | 5:16 pm GMT+7

Vietnam's government seeks to position country as 'regulated hub for digital assets in Asia': Dragon Capital

Vietnam's government seeks to position country as 'regulated hub for digital assets in Asia': Dragon Capital

The Vietnamese Government has advanced the regulation of digital assets, with a resolution launching a five-year pilot framework for issuance and trading. This framework signals the Government’s intent to position the country as a regulated hub for digital assets in Asia, which could attract new capital inflows, write Dragon Capital analysts.

Economy - Mon, September 15, 2025 | 2:20 pm GMT+7

Agribank introduces sizable $4.17 bln preferential credit package

Agribank introduces sizable $4.17 bln preferential credit package

Right from the beginning of 2025, Agribank launched a substantial preferential credit package worth VND110 trillion ($4.17 billion) to support individual customers.

Companies - Mon, September 15, 2025 | 1:32 pm GMT+7