BY EMMANUEL OGBONNA
The transformation of Bac Ninh is visible at street level, in the Chinese- and Korean-language signs above neighborhood shops and in the spicy dishes served at once-sleepy eateries. Just north of Hanoi, the city that was long defined by rice paddies and the gentle harmonies of centuries-old Quan Ho folk songs has become one of Vietnam’s busiest industrial hubs, a symbol of the country’s rapid ascent as a manufacturing powerhouse—and of the pressures now testing that rise.
Bac Ninh’s evolution mirrors a broader reshaping of Vietnam’s economy, accelerated by global trade tensions and a reordering of supply chains. Tariff hikes imposed during President Donald Trump’s trade confrontations with China pushed multinational companies to look for alternatives, drawing factories out of China and into Southeast Asia. Vietnam, with its strategic location, relatively low costs and investor-friendly policies, emerged as a prime beneficiary.
The country has profited from frictions between Washington and Beijing, building on earlier waves of foreign investment from Japan and South Korea that helped turn Vietnam into a critical node in global manufacturing. Yet the very success of that strategy is revealing its limits. Rising labor costs, worker shortages and infrastructure bottlenecks are squeezing manufacturers, even as regional rivals compete aggressively for new projects.
Vietnam’s leaders are now trying to push the economy up the value chain, shifting from basic assembly work toward higher-tech manufacturing while expanding export markets beyond the United States. That ambition is evident in Bac Ninh, where cranes, construction sites and newly expanded industrial zones stand alongside reminders of the city’s cultural past.
Traditionally known for artisanship, Bac Ninh’s first major industrial boom began around 2008, when Samsung built its initial smartphone factory there. That investment helped turn Vietnam into the South Korean electronics giant’s largest manufacturing base outside its home country and set the stage for Bac Ninh’s transformation into an industrial magnet.
More recently, Chinese companies have arrived in growing numbers, diversifying their production footprints to reduce exposure to U.S. tariffs and other trade restrictions. Since Hanoi and Beijing normalized relations in the 1990s, Chinese investment has steadily increased, with firms drawn to Vietnam’s electronics supply chains, expanding workforce and supportive local authorities. Chinese-speaking intermediaries often help smooth logistics and regulatory processes, making the transition easier for incoming companies.
Vietnam, however, cannot replicate China’s scale. China’s economy is roughly 40 times larger, underpinned by decades of investment, dense supply networks and a massive labor pool. To narrow the gap, Vietnamese authorities are racing to upgrade infrastructure. A new highway to the Chinese border has cut travel times by more than an hour, while plans are advancing for a railway linking Hanoi to the port city of Haiphong and onward to the border town of Lao Cai.
In December, Bac Ninh broke ground on the expansion of a high-tech industrial zone focused on electronics, pharmaceuticals and clean energy. The project is part of a synchronized nationwide push that saw Vietnam launch 234 major initiatives worth more than $129 billion just weeks ahead of a pivotal Communist Party congress in January, where leaders will set the country’s political leadership and economic direction.
In downtown Bac Ninh, the imprint of China’s presence is unmistakable. A convenience store carries the name Tmall, after Alibaba’s flagship e-commerce platform. Chinese-language signs advertise services for investors, and Chinese–Vietnamese language schools have opened to help workers and managers communicate across borders.
Yet competition for labor and resources is driving up costs. “It is becoming difficult to recruit workers,” said Peng, an employee at a telecommunications equipment company that relocated from Shenzhen, China’s southern technology hub. Speaking on condition that only his surname be used, he said labor costs have risen by 10 to 15 percent since 2024 and are expected to keep climbing.
Despite the shift of some production to Vietnam, manufacturers remain deeply reliant on China for technology, equipment and expertise. China has built what many executives describe as the world’s most complete manufacturing ecosystem, a system that cannot be recreated quickly. While factories producing footwear, furniture and electronics continue to relocate, Vietnam still trails China in infrastructure depth and logistics efficiency.
Those constraints are increasingly visible in boomtowns like Bac Ninh. Companies are offering higher wages, signing bonuses and even modest perks such as free meals, instant noodles on the first day of work or transportation subsidies for employees commuting from other cities, according to local reports.
Few countries have benefited more from the U.S.-China trade conflict than Vietnam, whose largest export market remains the United States. In 2024, Vietnam recorded a $123.5 billion trade surplus with the U.S., the third-largest after China and Mexico. That imbalance drew criticism from Trump, who threatened steep tariffs on Vietnamese goods before settling on a lower rate. Negotiations continue to keep most tariffs at that level, with Vietnam offering broader access for U.S. products.
A temporary easing of U.S.-China trade tensions following an agreement between Trump and Chinese leader Xi Jinping has reduced some uncertainty, but companies remain wary. Rather than shifting production to a single alternative, many are spreading factories across multiple countries to hedge against future disruptions.
Vietnam continues to attract strong foreign investment, with cumulative inflows exceeding $28.5 billion as of September, a year-on-year increase of 15 percent. Still, heightened scrutiny of Vietnam’s role in transshipment and tariff avoidance has prompted some firms to diversify further, moving parts of their operations to countries such as India.
Regional competition is intensifying. Indonesia and the Philippines, which missed some of Vietnam’s early gains, are promoting themselves as alternative manufacturing bases with reforms aimed at luring long-term investors. In the Philippines, new legislation allowing foreign investors to lease private land for up to 99 years has been pitched as a major incentive.
Vietnam’s long-term goal is ambitious: to become a high-income nation by 2045 and Asia’s next “tiger economy,” following the path of export-driven successes like South Korea and Taiwan. To get there, the government is encouraging manufacturers to upgrade technology, offering tax breaks on imported machinery and discounted industrial rents. Many factories still rely on non-automated equipment, and only a small share use robots on production lines.
The country is also working to reduce its dependence on the U.S. market by expanding exports to the Middle East, Latin America, Africa and India, instructing overseas trade offices to promote Vietnamese products and gather market intelligence.
For Bac Ninh, the challenge is emblematic of Vietnam’s broader balancing act: sustaining growth while managing rising costs, labor shortages and fierce regional competition. As Prime Minister Pham Minh Chinh put it when announcing the wave of projects in December, Vietnam must “reach far into the ocean, delve deep underground and soar high into space” if it is to turn today’s manufacturing boom into lasting prosperity.
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