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New China; new Vietnam

by Dan Harris

Got an email the other day from a loyal reader who is convinced that we all need to start looking at China differently. I found his email interesting and felt it worth sharing for both that reason and also because I am dying to read the comments it engenders. Here it is:

The last time I was in Shanghai I met with a bunch of Taiwanese engineers/factory owners. These are guys in their 60s who graduated from Taiwan engineering school back in the late 1970s/early 1980s. They have been quite successful in China. They all said the same thing: China has fundamentally changed. So they are taking steps to deal with the change.

Here is an example. A guy whose core business in China is manufacturing rubber gloves. He has done this business for 40 years: 20 years in Taiwan, and 20 years in China. He is moving the ENTIRE manufacturing program to Viet Nam, in the Saigon area. However, he is retaining the high value Chinese business: five technical schools a couple of medical service businesses, and a distributorship for consumer goods like toothpaste.

What these guys were saying and my takeaway from that was:

  • China is not bad these days, it is just different.
  • Those who pretend it is not different are going to get killed financially.
  • It makes sense to retain the high value added, easy money in China and to move the low value added manufacturing somewhere else.
  • The ONLY practical “somewhere else” these days is Viet Nam. No other country is even worth discussion. Note that for Viet Nam, you must recognize what it is really like. For example, this guy has already purchased his own electric generators and he has already secured his own independent supply of diesel fuel. He knows that he cannot expect to rely on Vietnam for either. He does not whine about it: he just does it. This attitude has allowed him to survive for 40 years.

What do you think?

Dan Harris is founder of the Harris & Moure law firm, a boutique international law firm focusing on small and medium sized businesses that operate internationally. China is the fastest growing area for the firm. Dan writes as a source of China legal and business information.

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