This emerging Asian economy is better value for big business, labour costs are cheaper… and huge investments are flooding in… here’s why…

If you missed out on China three years ago… don’t worry there’s a second bite of the cherry coming around. China and scores of other countries are outsourcing to Vietnam on a grand scale… and foreign investment is pouring into the country at a rate of knots… so much so that the Vietnamese economy looks set to take off as fast as China’s did… let me explain…

China sucked in more than 65% of the $792 billion in investment received by 21 leading Asian economies over the past five years. About 90 per cent of that money went into China’s coastal southeast region, which accounts for 60 percent of the country’s total exports. Growth is concentrated mainly in four provinces on China’s south-eastern coast: Guangdong, Jiangsu, Fujian and Zhejiang.

But the rest of China hasn’t shared in this bonanza. Incomes in western China’s poorest regions are one-tenth those of the richest areas on the east coast. That’s helped to double average monthly pay in the Dongguan city, China’s largest manufacturing centre, from 1,284 yuan in 2001 to 2,594 yuan in December 2006.

That growing income gap has been made the Chinese government extremely nervous – the last thing that they need is 700 million angry prols and peasants…

So, to help encourage investment and narrow the disparity, the comrades in Peking launched a “Go West” policy in 2000, to encourage manufactures to move inland. They’ve spent over $140 billion trying to put the major infrastructure in place to make that happen. They’ve built highways, airports and hydropower stations. But it just doesn’t seem to be enough.

Even with the improvements, power failures, substandard roads and congested railways reduced production in 2004 by 9.5 percent in the south-western city of Kunming. In coastal Shanghai, they cost only 2.3 per cent. So manufacturers aren’t really thrilled by the idea of “going West.” Instead, more and more of them are going South…to Vietnam.

Vietnam trounces China into the ground…

Of course, Vietnam isn’t just doing well because of China’s woes. It’s been making great strides of its own on just about every front. The country has been aggressively luring low-cost industries and it’s paid off massively.

Vietnam received $40.1 billion in pledged investment during 2007 – that’s up a whopping 354% from five years ago. And it absolutely trounces the $11.9 billion that foreign companies announced they plan to invest in central and western China last year. That’s just 30 per cent more than the $8.9 billion in planned investment that they announced in 2003.

And ever since they joined the World Trade Organization in 2007, they have had greater access to world markets. Last July, PricewaterhouseCoopers ranked Vietnam as the most competitive destination for manufacturing businesses among the world’s top 20 emerging markets; China was second.

This doesn’t mean the end of China’s economic miracle. The Asian giant has been increasing its production of higher- value goods — computer chips, electronic gadgets, automobiles. China’s exported about $47.6 billion of high-tech products last year and they now make-up 28.5 percent of total exports. That’s up by 412 percent since 2002.

But the country is losing its ability to compete at the lower end of the manufacturing industry. And that’s opening up a brilliant opportunity for Vietnam. Because it’s not just international companies that see better value in Vietnam – even Chinese manufacturers are considering relocating to stay competitive.

Ray King, export manager at the Zhejiang Hefeng Shoes Co., which employs 1,000 people says “Customers say our prices are crazy…They always say other suppliers in Vietnam and Thailand are cheaper.” So now he’s thinking of relocating to Vietnam. And he’s far from alone.

In fact, a third of the manufacturers in Guangdong province – which produces 30% of China’s exports – will be closed in three years as they relocate to surrounding Asian countries according to a report by merchant bank Credit Suisse two weeks ago.

China passes new law that guarantees Vietnam’s advantage…

A big part of Vietnam’s growing advantage over China is its lower wages. Vietnam’s labourers earn an average of $104 a month. That’s 41% less than what China’s lowest-paid workers in the central province of Jiangxi make.

And China has passed a new labour law that practically cements Vietnam’s advantage. The law requires companies to pay minimum wages and severance pay and it has helped drive up the cost of labour in China by 22% over the last year.

The era of cheap goods from China is coming to an end – and fast. It isn’t going to be long before “Made in Vietnam” becomes as ubiquitous as “Made in China” is today or “Made in Japan was in the 80’s.

How can you profit from this?

Given the massive windfall that Vietnam is set to reap, we think that it’s a brilliant time to buy into this growth story.

As with every emerging economy – it is vital to not only get in at the right time… but to invest in the best way to make maximum profits…

Over at Profit Hunter we believe that we’ve found the best way to do this… find out what this is right now…

Regards,

Manraaj Singh
Editor
Profit Hunter