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China Looks to Benefit From Vietnam Business if TPP Advances

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With the U.S. election taking place Tuesday and neither candidate keen on the Trans-Pacific Partnership as is, the deal’s fate hangs in the balanc. But China looks poised to pick up from any trade influx in Vietnam.

Vietnam is in a prime position right now as the country signed a free trade deal with the European Union last year and if TPP moves forward, it would have access to markets worth $44 trillion in combined GDP, according to Reuters. Not to mention, the country also has beneficial trade deals with South Korea and access to a 10-nation free trade zone as a member of the Association of Southeast Asian Nations (ASEAN).

Despite the hurdles TPP still faces, China has already made moves toward Vietnam in hopes of getting a piece of that bigger trade pie.

China’s investments in Vietnam quadrupled year over year to $1 billion, just in the first nine months of this year, Reuters reported. And they are spending there not only to capitalize on labor costs as low as one-third of their own, but from those trade benefits it doesn’t enjoy from home.

The lion’s share of the investment is going straight to the textile sector, where Vietnam is already the second largest supplier to the U.S., behind China.

Vietnam’s share of the textiles and apparel market slipped 8.3% to 355.5 million SMEs in September (though it increased 10.7% in August), according to OTEXA, and the U.S. Department of Commerce has said growth could reach 45 percent to $16.4 billion by 2025. At the same time, China’s share, which has been declining fairly steadily, could fall by just as much, dipping to $23.7 billion by 2025.

Chinese firms are solidifying their positions in Vietnam, investing in all parts of the supply chain, since goods made in Vietnam with local inputs or inputs from the other TPP nations, will enjoy duty free trade benefits under the agreement.

Hong Kong-based Texhong Textile Group said in April that it took out a $103 million loan to expand production at its Vietnamese facility, Texhong Galaxy Technology, and is building out $450 million industrial park. By the end of the third quarter this year, the company had planned to have 1.2 million spindles in Vietnam.

But all of those investments may be for little if TPP gets tied up because the incoming president doesn’t want to move it along.

Republican candidate Donald Trump wants to ditch and redo all of America’s trade deals and has said TPP would be a detriment to U.S. jobs. Democratic candidate Hillary Clinton said the deal doesn’t meet her standard for creating jobs, raising incomes and furthering our national security, so she would be against it, if elected.

Because of the uncertainty, Reuters said Vietnam’s ruling party has taken ratifying TPP off of its agenda for this year.

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