The bilateral relationship between Vietnam and China has a long history of cultural and economic exchanges, and the two countries have maintained a close and enduring friendship over the years. As one of Vietnam’s largest trading partners and foreign investors, China has played a crucial role in Vietnam’s economic growth. With the increasing flow of foreign direct investment (FDI) into Vietnam over the years, China has emerged as a significant player in the FDI industry in Vietnam.

The enduring friendship between Vietnam – China

Over the past 70 years, Vietnam-China relations have seen ups and downs, but friendship and cooperation remain the main trends. The friendship cultivated by President Ho Chi Minh and President Mao Zedong and generations of leaders of the two countries, has become a valuable common asset of the two nations, contributing to maintaining the trend of stable development of the traditional friendship between Vietnam and China, as well as bringing practical benefits to the two peoples.

On January 18, 1950, China established the world’s first diplomatic relations with the Democratic Republic of Vietnam, marking a significant moment in the two countries’ relationship. In 1999, the 16-character principle was established during a visit by General Secretary Le Kha Phieu to China, outlining the guiding principles for bilateral cooperation in the 21st century.

The spirit of “four goods” was later agreed upon during President Hu Jintao’s visit to Vietnam in 2005, emphasizing the aim of making the two countries “good neighbors, good friends, good comrades, and good partners.” In 2008, the framework of a “comprehensive strategic cooperative partnership” was established based on the “16-character” principle and the spirit of “four goods” during General Secretary Nong Duc Manh’s visit to China.

General Secretary Nguyen Phu Trong’s official visit to China in January 2017 helped to deepen the comprehensive strategic cooperative partnership between the two countries, enhance mutual trust, and promote peace, stability, cooperation, and development in the region and the world.

Overall, the Vietnam-China relationship has maintained a stable and positive trend; the leaders of both sides have achieved important common understandings, contributing to elevating the bilateral relationship to new heights.

Advancing bilateral cooperation between Vietnam – China

At the state-level dialogues and exchanges between the governments of Vietnam and China, the Vietnamese Government engages in sharing, interacting, and acquiring knowledge from the successful experiences and valuable lessons of the Chinese Government in formulating and implementing strategies aimed at attracting foreign direct investment (FDI). The underlying objective of this initiative is to promote the economic growth of China over the last forty years. Additionally, the Vietnamese Government seeks to gain insights into the policy implications and practical experience of FDI attraction, which can be applied to their own economic development endeavors.

In May 2022, China and Vietnam released a joint statement on further strengthening and deepening the comprehensive strategic cooperative partnership between the two countries during the visit of General Secretary of the Communist Party of Vietnam Central Committee Nguyen Phu Trong to China. It emphasized their commitment to enhancing the comprehensive strategic cooperative partnership between the two countries from a strategic and long-term perspective amidst the global changes. The joint statement also included the agreement to maintain the China-Vietnam Steering Committee for Bilateral Cooperation mechanism and to promote cooperation in various fields, such as foreign affairs, defense, security, and law enforcement. Both countries also vowed to work together to resist “peaceful evolution” and “color revolutions” and strengthen counter-terrorism efforts.

On July 13, 2023,  Vietnamese Minister of Foreign Affairs Bui Thanh Son met with Politburo member and Director of the Communist Party of China Central Committee’s Foreign Affairs Commission Wang Yi in Jakarta. The two officials affirmed that their countries will keep attaching importance to each other’s roles and the bilateral comprehensive strategic cooperative partnership. They will continue to effectively implement the joint statement issued in October 2022, and the concrete outcomes of the trip to the Northeast Asian nation by Prime Minister Pham Minh Chinh in June 2023. The two countries will assist each other with national modernisation while enhancing high-quality connectivity between the “Belt and Road” initiative and the “Two Corridors, One Belt” framework.

Overall, China and Vietnam continue to deepen their cooperation and strengthen their relationship in the new era, while also addressing challenges and maintaining stability in the region.

Three stages of trade, economic, and investment cooperation between Vietnam and China

Since 2016, Vietnam has remained the biggest trade partner of China in the Association of Southeast Asian Nations (ASEAN), and China has been Vietnam’s largest trade partner for many years. Hence, China’s direct investment in Vietnam has continued to rise through the years.

China’s FDI investment process in Vietnam is divided into three stages with the following results:

• Stage 1: From 1991 to 2001: China’s first FDI in Vietnam was in 1991 when a Guangxi enterprise (China) joint ventured with a Vietnam group to open Hoa Long restaurant in Hanoi. The period is considered as ‘the exploratory phase’, which resulted in modest achievements as China launched 110 investment projects in Vietnam with a total registered capital of 221 million USD.
• Stage 2: From 2001 to 2010: China increased both quantity and the amount of capital scale of FDI projects in Vietnam (about 2.5 million USD/project), with many projects ranging from 1-10 million USD.
• Stage 3: From 2010 to present: Chinese FDI in Vietnam has undergone significant changes, continuously rising in the ranking position, increasing in scale, changing in form and fields, and expanding into new geographical areas. By the end of 2019, the total FDI capital invested in Vietnam from China continued to increase sharply, nearly doubling the level of 2018 (with 683 newly registered investment projects and a total capital of 2.3 billion USD).

Despite COVID-19, Chinese FDI still increased through the years. In 2022, China invested approximately USD 2.52 billion in Vietnam with 283 newly licensed projects, ranking 4th among the total countries investing in Vietnam, of which newly registered capital reached USD 1.35 billion and adjusted capital was over USD 1 billion with 283 projects.

In the first five months in 2023, China’s total investment capital in Vietnam reached over USD 1.608 billion, up 41.9% compared to the same period in 2022. Of which, newly registered capital reached over USD 1.086 billion and adjusted capital was USD 451.76 million with a total of 156 projects. In terms of total investment capital, China ranks 3rd among the total countries and territories investing in Vietnam, after Singapore and Japan. The total number of China’s investment projects still in effect in Vietnam is 3,720 with a total registered capital of over USD 24.87 billion.

Prospects for future cooperation between China and Vietnam

The flow of investment capital from China to Vietnam has significantly changed in recent years with a diversity of industries and sectors. In previous periods, China’s investment capital only focused on sectors such as restaurants, hotels, and consumer goods. However, recently, industries such as textiles, leather shoes, textile fibers, mineral exploitation, and industrial zones are attracting FDI from China.

Vietnam’s appeal to Chinese investors can be attributed to its strategic geographical location bordering China and its active participation in a series of new-generation free trade agreements, including EVFTA, CPTPP, and RCEP. These factors have established a strong foundation for attracting foreign investment capital, particularly from China. Additionally, Vietnam’s low labor costs and an extensive system of industrial parks and factories established by major corporations further enhance its attractiveness as a destination for foreign investment.

Final thoughts

The trade and economic cooperation between Vietnam and China has thrived in recent years. The two countries have complementary economies, a long history of trade and economic relations. This cooperation has the potential to benefit both countries, and is likely to continue to grow in the years to come. The Vietnamese business environment is dynamic and fertile, but Chinese SMEs can face challenges due to property access and policy amendments.

To navigate through these challenges, investors are advised to consult top leaders in the industry. Viettonkin, with our specialized knowledge and experience in Vietnam and global markets, as well as legal procedures across diverse majors and sectors, can be your trustworth companion along  this inspecting and adapting process. Reach out to us if you are looking for new opportunities in Vietnam. With us by your side, you can focus on what matters the most!