In recent years, China has lost ground in the production of consumer items -clothing, footwear, technological devices, furniture, etc- in favor of its neighboring countries. One of the companies that wants to reduce its dependence on what was once the world’s factory is Apple and, for this, it has set its sights on Vietnam, a region in which it already produces some of its devices. His plan is to invest 300 million dollars in that nation, as well as build a new plant.
The person in charge of building the new factory will be the Taiwanese company Foxconn. Apple’s largest supplier has just signed a lease of a 45 hectare plot valued at about 62.5 million dollars until 2057. The new plant, located in the Quang Chau industrial park, will allow the technology company to satisfy “its operational needs and expand its production capacity,” according to the statement that includes the South China Morning Post. At the moment, it is unknown which devices will be produced at these facilities.
Apple made the decision to leave China last summer following the protests by Chinese citizens against COVID-zero policies imposed by the Beijing government for almost three years, which affected its Zhengzhou plant, the largest in the world. Foxconn has since signed a $300 million deal with a Vietnamese developer to build another factory in Bac Giang and has moved some of its MacBook production to Vietnam, as well as iPhone 14 production, to its India plant. region in which it also plans to invest 500 million dollars, according to Reuters.
China’s loss of ground in manufacturing and exports is not solely due to the imposition of extensive lockdowns on entire cities. The US decision to impose trade tariffs to Chinese exports in 2018 caused many companies to move their factories to other areas, Vietnam being one of them. What was initially limited to clothing and footwear has been extended to other raw materials and finished products over the years. As a result, distance trade from the neighboring nation has increased by almost 360% since 2014.
In 2023, the reduction in net exports will cut China’s growth by 0.5 percentage points, according to calculations by Goldman Sachs. This is surprising if one takes into account that in 2021 they contributed 1.7 percentage points to the growth of the country’s Gross Domestic Product (GDP). In this situation, their only way out is to resort to the national markets, point out from Guotai Junan Securities. With the easing of health restrictions, the Beijing government expects retail sales to rise 6.8% this year and GDP growth to stand at 5.5%. The US entity, on the other hand, was less optimistic at the beginning of the year, noting that it could reach 5.2%, a figure that coincides with the forecasts of the International Monetary Fund.
