Tiếng Việt
Facing the impact of the COVID 19 pandemic on the global economy. Many foreign company in China consider investing in other countries. Vietnam is expected to be one of the first countries to welcome global supply chain shifts. Understanding and acknowledging this trend will help foreign company to invest in Vietnam.
>> Read more: Step by step establishing foreign capital company in Vietnam
Mục lục
1. Overview of the global supply chain
The supply chain is a system of organizations, people, activities, continuous information related to moving products and providing services from manufacturers to consumers. The global supply chain is a combination of the above activities but has a global scope. Activities in the supply chain to turn natural resources, raw materials and other components into a finished product to deliver to customers at the consumption stage.
The concept of supply chain also encompasses both logistics and manufacturing process. It can be seen that the supply chain has a great impact on the economy and participates in all areas of life. The greatest value of the global supply chain is the continuous flow of goods and currencies between countries.
Airbus A380 aircraft is a typical example of the supply chain. This aircraft made up of 4 million separate sets manufactured in 30 different countries. For example, wings made in Wales, England; the body and tail stand from Hamburg, Germany; horizontal wings made in Cadiz, Spain.
2. The cause of the shift in the global supply chain
An important consequence of internationalization is the introduction and development of global supply chains. Due to advances in science, technology and communication, many countries and territories can participate in the production process. The global supply chain, in general, brings many benefits by exploiting cheap labor and making countries more dependent on each other.
Interdependence among countries makes the global supply chain can be disturbed, especially when a country or region occupies too much proportion in the supply chain. The crisis in China due to the COVID 19 epidemic is evidence of an imbalance in the share of production between countries. This is also the cause of the current global supply chain shift:
– China is the world’s largest factory, many goods produced here make China account for a large proportion of the global supply chain. This may cause the flow of goods to be interrupted if China’s political and economic situation is unstable;
– Being aware of its dependence on factories in China, many countries such as the US, Japan, and South Korea are speeding up the relocation of factories to other countries such as Vietnam and India. This comes from the need to influence geopolitics, competition among countries;
– COVID 19 epidemic dealt a blow to the global supply and demand chain. The production, transportation, consumption of goods and money sources have been stopped. Especially in China because this is the country with the first case;
– Many countries have not controlled COVID 19, so production and business activities have been delayed. While the demand for goods worldwide is still huge. The reproduction is the top business priority. This makes countries well controlled by the epidemic an attractive destination for foreign company.
3. Movement of global supply chains to Vietnam
The trend of global supply chain shifts came from 2018-2019 after the US declared a trade war with China. The goal is to reduce tariffs pressure on Chinese exports and move production lines to countries with cheaper production costs. However, the COVID 19 pandemic has become the largest catalyst for countries to decide to undertake supply chain restructuring as quickly as possible. The world’s excessive dependence is evident in a pandemic. As factories in China closed, the US pharmaceutical market froze.
Vietnam faces many opportunities as well as great challenges when receiving the shift of global supply chains:
– China is still the largest consumer market in the world with more than 1 billion people. Many foreign company do not want to leave this market;
– Moving factories out of China cannot happen immediately, it takes a long process. Over decades of developing a factory network, the supply chain in China has reached a high level of completion. This will be an important factor retaining foreign company;
– Although Vietnam is mentioned as a potential destination for foreign company, the problem of infrastructure, roads, ports is limited, causing many investors’ concerns. Human resources are inadequate but skilled are limited compared to other countries in the region. And most importantly, Vietnam’s raw materials still depend on China.
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