For decades, “Made in China” was synonymous with global manufacturing. As 2026 approaches, that narrative is rapidly evolving under the China+1 strategy, with Vietnam emerging as a top manufacturing destination for Chinese SMEs. Pressured by geopolitical shifts and rising domestic costs, Chinese SMEs are no longer viewing Vietnam merely as a neighboring alternative, but increasingly as a strategic second base and long-term operational home.
What Is The China+1 Strategy?
At the heart of this migration is the China+1 strategy. Historically, this framework was used by Western multinationals to reduce their over-reliance on a single country. In 2025, however, it is the Chinese SMEs themselves who are leading the charge.
China+1 involves maintaining core high-tech operations or R&D in hubs like Shenzhen or Suzhou while establishing a “plus one” assembly or processing base in other countries, such as Vietnam.
For Chinese SMEs, rising wages, stricter environmental regulations, and increasing client concern for supply chain transparency have compressed margins. SMEs can pivot fast, making Vietnam an attractive first step rather than a complex multi-country strategy.
Core Advantages of Moving to Vietnam
For Chinese SMEs, Vietnam’s appeal lies in a rare combination of cost efficiency, trade access, and operational familiarity.
Competitive Labor and Wage Gaps
The most immediate driver for any SME is the bottom line. As China’s economy matures, its manufacturing wages have climbed steadily.
| Metric (2025 Projections) | China Manufacturing | Vietnam Manufacturing |
| Average Hourly Wage | ~US$6.80/hour | ~US$1.55/hour |
| Minimum Wage | US$135 – US$ 195 | US$220 – US$237 |
| Workforce Age | Aging population | Over 50% of the population is under 35 |
This wage gap gives SMEs room to absorb compliance costs, reinvest in automation, and remain price-competitive in export markets.
Beyond wage differences, Vietnam’s younger workforce also offers greater long-term scalability. For SMEs planning five to ten years, demographic stability plays a critical role in sustaining operations.
These cost structures enable SMEs in labor-intensive sectors, such as textiles and electronics, to remain profitable while scaling up.
Leveraging the Tariff Shield
Vietnam’s “open-door” trade policy has created a seat at almost every major trade table in 2025. The extensive free trade agreement network acts as a tariff shield for export-oriented SMEs.
- RCEP & ACFTA 3.0: These agreements allow SMEs to source materials from China, perform substantial transformation in Vietnam, and qualify for “Made in Vietnam” preferential tariffs.
- EVFTA: Provides a clear roadmap to 0% tariffs for exports to the EU.
- CPTPP: Grant duty-free access to Japan, Canada, and Mexico – markets that are increasingly difficult to reach from a China-only base.
For example, an electronics SME sourcing components from Guangdong can ship semi-finished inputs to Vietnam, complete final assembly and packaging locally, and then export to the EU under EVFTA.
This structure allows SMEs to remain embedded in China’s component ecosystem while unlocking preferential market access that is unavailable under a China-only setup.
Operational Excellence in Industrial Clusters
Vietnam has strategically developed industrial zones (IZs) that cater specifically to the needs of Chinese manufacturers.
| Region | Primary Industries | Strategic Advantage |
| Northern Vietnam (Bac Ninh, Hai Phong) | Electronics, Semiconductors, Automotive parts. | Proximity to South China, 120km to the Chinese border. |
| Southern Vietnam (Binh Duong, Dong Nai) | Furniture, Textiles, Consumer Goods. | Mature logistics ecosystem and proximity to major ports like Cat Lai. |
| Central Vietnam (Da Nang) | Light manufacturing, Food processing. | Emerging distribution node with lower land competition. |
As of mid-2025, occupancy rates in Northern key industrial parks remain high at 87%, driven by a wave of electronics and tech-focused FDI.
Moreover, Vietnam’s workforce offers high adaptability. Cultural proximity and operational familiarity further reduce training time for Chinese management teams, accelerating time-to-productivity.
Critical Considerations for Market Entry
There are several local nuances to be navigated to ensure a successful transition for Chinese SMEs.
Regulatory Compliance and Labor Laws
The administrative process in Vietnam is becoming more streamlined. Under Law No. 57/2024/QH15, the Special Investment Procedures were introduced, which replace pre-approval with post-inspection oversight, reducing IRC insurance to just 15 days for eligible high-tech and industrial projects.
Ensure your operations are compliant by reviewing our detailed breakdown of Vietnam Labor Law!
Logistics Synergy and Infrastructure
Infrastructure projects, such as the railway connecting Kunming to Hai Phong, are expected to boost connectivity further later this year. For SMEs, this means raw materials can reach Vietnamese factory floors in record time.
The Future Outlook: Transitioning to Industry 4.0
Vietnam will no longer be just a destination for low-value assembly. The government aims to increase manufacturing’s contribution to GDP to 30% by 2030, with a heavy focus on green energy, EV components, and smart manufacturing. For SMEs, this shift creates opportunities to move beyond assembly into higher-value manufacturing and long-term supplier partnerships.
Conclusion: A Win-Win Partnership
The rise of the Vietnam manufacturing hub for Chinese SMEs represents a new era of regional integration. By combining China’s advanced component ecosystem with Vietnam’s assembly efficiency and global trade access, SMEs are building a more resilient and profitable future.
Planning market entry into Vietnam? Explore our guide on Vietnam Ownership Limit: Guide for Foreign Direct Investment Companies.
About Us
The Nest Asia is a one-stop resource offering comprehensive information, practical relocation advice, cultural insights, valuable connections, and trusted services to help expatriates living in Vietnam navigate the transition, overcome challenges, and build a fulfilling life abroad. Starting your journey in a new country can often feel overwhelming. The Nest Asia is your trusted partner – we’re here to simplify that process and ultimately make Vietnam feel like home for you and your loved ones.
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Disclaimer: The Nest Asia is not an authorized provider of official government or non-government services. The information provided is intended for general guidance only. While we strive to offer accurate and timely information, we make no representations or warranties regarding its completeness or accuracy.
