“China plus one” model in modern conditions of global uncertainty: the case of China – Vietnam coopetion

Abstract

The “China plus one” model was updated after 2009 due to domestic factors, and after 2018 – due to global factors. The following are identified as the main internal reasons for the implementation of the “China plus one” model: the increase in the cost of production due to the increase in labor costs, social protection of the population and increased environmental requirements; institutional specificity; selectivity of granting benefits; imperfection of judicial protection; violation of intellectual property rights; prejudice of the population towards companies of certain jurisdictions as a cause of danger and decrease of demand in the domestic market. The main global factors that determine the diversification of economic activity by moving certain links in global production and sales chains outside the borders of the China include: the trade war between the USA and China; the Covid-19 pandemic; further slowdown in China’s economic growth; policy of global leaders to reduce dependence on China, sign new transregional agreements. The main advantages and disadvantages of transferring links of production and sales chains to Vietnam are considered. The main advantages include: a common land and sea border between the two countries, which significantly reduces the logistical and cost burden; modern infrastructure; macroeconomic and political stability, stock market, not a high level of payment for skilled labor; high rates of economic growth. Vietnam has demonstrated a flexible and effective response to the uncertainties of the global business environment. Disadvantages include the presence of territorial disputes and regional competition between countries. As a result of the involvement of Vietnam in the “China plus one” model, the restructuring of bilateral trade took place through the multiple growth of Vietnamese hightech exports to China, foreign investments increased, which contributed to the economic growth of Vietnam. Using the example of Vietnam, it is substantiated that all participants in the China plus one model benefit: international companies that diversify risks, China and Vietnam.