Summary:

While it seems that China will continue as the world’s super factory and leading exporter, Vietnam is increasingly exporting products similar in structure to Chinese exports. Vietnam is emerging as an attractive option for international firms as a cheaper and better manufacturer than China.^[1],[2]

Using the United Nations Comtrade database from 2004 – 2021, Asia Competitiveness Institute calculates the correlation coefficient between China’s and Vietnam’s export distribution across products to measure their export similarity. The similarity (correlation) could theoretically range from 0 to 1, with the higher value indicating that the two countries have a higher similarity, and 1 indicating identical export shares for every product. The export similarity between China and Vietnam rose from 0.075 in 2004 to 0.796 in 2021, as suggested by the correlation coefficient. This indicates that the export structure of Vietnam is swiftly approaching that of China over time, and there are more and more overlaps between their export bundles. Further breaking down the export products into four main categories — (i) Manufacturing; (ii) Food, drinks, and tobacco; (iii) Energy products, and (iv) Raw materials — the manufacturing export, which includes goods such as machinery, chemicals, electronics, leather, and footwear, appears to be the main factor contributing to this rising similarity. Nevertheless, whether this favourable trend for Vietnam will continue with the gradual opening up of China in 2022 and 2023 remains an open question that requires further investigation.

Highlights:

• Vietnamese exports are becoming more similar to the structure of Chinese exports, showing that Vietnam is catching up with China and is developing a more complex and sophisticated export bundle.
• The manufacturing export bundles, including products such as machinery, chemicals, electronics, leather, textiles, and footwear, mainly drive this growing similarity.

Data Source: United Nations Comtrade Database

Article By FAN, Litianqi

Graphic By GE, Yixuan

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[1] https://www.businesstimes.com.sg/international/asean/asean-china-connection/blocking-chinas-path-rise-made-vietnam

[2] https://www.economist.com/asia/2022/09/22/vietnam-is-emerging-as-a-winner-from-the-era-of-deglobalisation