Chinese investment surges into Vietnam

The FDI capital from China into Vietnam is expected to soar in 2024, with the industrial real estate in the North consistently attracting Chinese investors in the fields of solar power and high technology. 

FDI Accelerates into Vietnam

The mid-December 2023 state visit to Vietnam by Chinese General Secretary and President Xi Jinping is seen as a catalyst for significantly enhancing economic cooperation between the two nations.

China has consistently been among the top five countries with the largest investments in Vietnam over the past five years. According to data from the Ministry of Planning and Investment, Chinese investors have undertaken 4,032 projects in Vietnam, with a total registered capital of over USD 26 billion, ranking sixth out of 144 countries and territories investing in Vietnam.

In 2023, Chinese investors registered 632 new projects in Vietnam, the highest among all countries and territories. China continues to be Vietnam’s leading economic partner. According to forecasts by Professor Nguyen Mai, Chairman of the Foreign Investment Business Association, Chinese FDI is expected to further thrive in 2024-2025 as the bilateral relationship strengthens. He believes that businesses from both sides are now ready to collaborate in high-tech sectors, moving away from labor-intensive industries such as textiles and footwear.

In anticipation of President Xi Jinping’s visit, major Chinese corporations proactively conducted investment surveys in Northern provinces of Vietnam. For instance, Wingtech Group, China’s largest smartphone assembler, committed to continue surveys and consider investing in Phu Tho province. Goertek Group invested an additional USD 280 million in a new project and expanded an existing one in Bac Ninh province.

Large-scale, high-tech projects are on the rise, especially in the optics and solar energy sectors. In late October 2023, Quang Ninh province granted investment registration for the Jinko Solar Hai Ha Vietnam photovoltaic technology complex, with a total investment of USD 1.5 billion by Jinko Solar Vietnam Industrial Company, a subsidiary of the world’s largest and advanced solar panel manufacturer, Jinko Solar Holding, based in China.

Hai Duong attracted two more projects from Chinese companies, with a total investment of nearly USD 400 billion. The first project, by Deli Group (China) in office supplies manufacturing, registered a total investment of USD 270 million, located in the expanded Dai An Industrial Zone. The second project proposed by BoViet, a subsidiary of BoWay Group (China), aims to invest in a solar cell manufacturing plant with a total investment of approximately USD 120 million. When these two new projects are operational, an estimated 4,000 workers are expected to be employed.

In Thai Nguyen, Trina Solar, a major Chinese player in the solar energy panel industry, is the largest investor in the Yen Binh Industrial Zone with two operational plants. The company also proposed the implementation of phase 3 of its energy development plant project in Thai Nguyen, with an estimated investment of USD 420 million. This represents the largest overseas investment by the company in the solar power sector.

Industrial Property in the North heats up

According to Mr. John Campbell, Deputy Director of the Industrial Services Department at Savills Vietnam, the key economic region in Northern Vietnam is attracting Chinese businesses, especially those in the solar energy manufacturing sector. Vietnam’s proximity to China creates favorable conditions for the transportation of goods, raw materials, and production lines.

The key economic regions in Northern Vietnam are strategically located near China, with industrial zones and clusters strategically placed for convenient transportation via road, waterway, and railway, facilitating connectivity with Hanoi, Hai Phong port, Northwestern provinces, and Yunnan province in China. Coupled with the competitive pricing of industrial land in the North compared to the Southern region, this creates a unique appeal for Chinese investors in the region.

In recent years, leading Chinese solar energy companies have expanded their production in Vietnam, aiming not only to penetrate the Southeast Asian market but also using it as a stepping stone for easier entry into the European and American markets.

Furthermore, Vietnam’s high level of economic integration is noteworthy. To date, Vietnam has established economic and trade relations with around 224 partners from various countries and regions worldwide, providing favorable opportunities for Chinese businesses to expand their presence in the market.

“Remarkably, the Vietnamese government has recently introduced tax incentives and clean energy strategies to attract foreign investors, further enhancing the investment attractiveness of Vietnam in comparison to neighboring markets,” added Mr. John

CBRE predicts that in the next two years, industrial land rental prices in Vietnam are expected to increase by approximately 6-10% annually in both the North and the South. Strong demand from various industries and nationalities is driving rental price growth in many localities. Additionally, pre-built warehouse rental prices are forecasted to slightly increase by 2-4% annually in the next two years.

Seizing this opportunity, Northern provinces have also planned industrial zones and clusters to attract capital to these promising areas. For example, Thai Nguyen currently has 5 industrial zones and 11 industrial clusters in operation, with plans to expand industrial land area to 6,000 hectares by 2030.

However, according to Mr. John Campbell, the industrial market landscape is changing with the involvement of more investors. As manufacturing and logistics sectors evolve, products diversify, including pre-built factories, warehouses, multi-story facilities, integrated facilities, temperature-controlled buildings, and custom constructions.

In just five years, tenants have more options, no longer bound by the traditional 50-year land lease term. This has led to intense competition among investors, with many pre-built projects entering the market in key provinces.

To attract the best businesses, industrial zones and pre-built real estate developers should focus on high-value-added services and incentives beyond rental prices. Examples include market entry services, personnel and legal support, management services, and sustainable initiatives.
“Furthermore, the government should continue investing in infrastructure and enhancing skills for Vietnam’s workforce to improve productivity and efficiency. Simultaneously, promoting supporting industries, strengthening the supply chain, streamlining investment procedures and land use, as well as implementing digitization, are all key priorities for Vietnam’s industrial sector,” noted Mr. John.

Source: Vneconomy, Tienphong