U.S.-China Trade War Boosts Vietnamese City's Economy Vietnam's economy grew faster than any mature country last year, partly because of the trade war. Manufacturers are leaving empty factories in China and are fleeing to cities like Hai Phong.
NPR logo

U.S.-China Trade War Boosts Vietnamese City's Economy

  • Download
  • <iframe src="https://www.npr.org/player/embed/693799094/693799095" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
U.S.-China Trade War Boosts Vietnamese City's Economy

U.S.-China Trade War Boosts Vietnamese City's Economy

U.S.-China Trade War Boosts Vietnamese City's Economy

  • Download
  • <iframe src="https://www.npr.org/player/embed/693799094/693799095" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

Vietnam's economy grew faster than any mature country last year, partly because of the trade war. Manufacturers are leaving empty factories in China and are fleeing to cities like Hai Phong.

STEVE INSKEEP, HOST:

Some economists say there is no winner in a trade war. They've said that especially during President Trump's trade war with China. Turns out, there is at least one winner, though. Vietnam is gaining business. It's receiving what you might call trade war refugees who are taking their business out of the war zone. NPR's Rob Schmitz went there.

(SOUNDBITE OF TRUCK HORNS HONKING)

ROB SCHMITZ, BYLINE: On the new expressway connecting Hanoi to the ocean, trucks loaded with toys, televisions and telephones have brought traffic to a standstill, their drivers wearily gazing out under rows of cranes building more factories. The only one smiling is Dan Krassenstein, a supply chain manager who's followed one economic boom after another, from Taiwan to China, and now to Vietnam.

DAN KRASSENSTEIN: Everything I'm seeing now in South Asia and Southeast Asia, it's like "Groundhog Day." It's like 30 years ago, 20 years ago, 10 years ago. It just keeps repeating itself.

SCHMITZ: But this time, a trade war is accelerating the global supply chain shift. President Trump's tariffs on China were part of an effort to bring jobs back to America, but those jobs are heading to countries like Vietnam, instead.

KRASSENSTEIN: So today, are you selling any bags to the United States?

SCHMITZ: Krassenstein's company, Procon Pacific, sells heavy-duty plastic bags for transporting goods like sugar, flour and fertilizer on container ships. Today Dan's visiting a company named Anphat. He's going to check out their factory to see if he wants to source his bags here. Sales director Jessica Hien says they're eager to work with him.

JESSICA HIEN: And we do welcome any comments about the factory or anything at the production...

SCHMITZ: Did you hear that - we welcome comments? Dan heard that.

KRASSENSTEIN: I always walk along the walls because that's where dirt gathers, rodents, insects, et cetera.

SCHMITZ: On his factory tour, he's checking for cleanliness. These are food-grade bags, and the factory floor needs to be spotless to prevent contamination.

KRASSENSTEIN: Clearly, you can see there's some spider web. So that's an area where something from the outside is coming in.

SCHMITZ: It's been tough moving out of China. Suppliers there keep a tidy ship, and a typical worker makes 50 bags a day. Vietnamese workers are half as productive, but they make less than half the wage of a Chinese worker. Krassenstein estimates a savings between 10 percent and 20 percent by making his bags here. A drawback, though, is cleanliness.

KRASSENSTEIN: And see right here? This trash can, I found some evidence of candy wrappers. This is also a food-grade violation, with candy wrapper.

SCHMITZ: There's a sign at the entrance saying no food or beverages. But then Dan finds a vending machine on the factory floor. There's clearly room for improvement.

(SOUNDBITE OF CONSTRUCTION SITE AMBIENCE)

SCHMITZ: And Vietnam is on a path to do just that. This is the soundtrack to the port city of Haiphong, population 2 million. In the past few years, Haiphong has built an expressway to the capital, Hanoi, one to China, an airport and a deep-water port. Cranes building five-star hotels fill the sky. Last year, its economy grew by 17 percent, more than any other city in Vietnam. If there's a clear winner of the U.S.-China trade war, its Haiphong. Hans Kerstens works for Deep C, a Belgian company developing the city's port. He says, the companies that are leaving China, this is where the rebuilding.

HANS KERSTENS: Most of the time, we see a decision time between one and two years. Last year, a lot of the companies that we signed, the decision time was much shorter. We had one company coming in in the evening, signing-in in the morning. It was a Chinese company. We had never seen that before.

SCHMITZ: And it's not only the trade war drying supply chains from China. The electricity price in Vietnam is half that of China's, and if companies relocate to Haiphong, they pay a fraction of the taxes. Government incentives mean the average tax over a company's first two decades is around 4 percent. The port city's location is also important, says Deeps C's general director Bruno Jaspaert.

BRUNO JASPAERT: I think Haiphong is strategically and geopolitically very well-located. The South China Sea is heavily contested, and the border line where you don't have issues is about here.

SCHMITZ: That wasn't always the case. Haiphong's port, which empties into the Gulf of Tonkin, was heavily bombed in the Vietnam War. Jaspaert says when they were building the deep-water port, they had to blow up portions of the seabed to detonate unexploded bombs buried in the sand.

(SOUNDBITE OF SCHOOLCHILDREN CHATTERING)

SCHMITZ: The flood of expats into Haiphong can be best seen and heard at the city's only international school. Principal John Mudd, a native of Montana, went from managing 50 students to 140 in a single year. And now the new school he opened in the fall to accommodate all these new students will have to expand.

JOHN MUDD: We just moved in here five months ago, and we are already doubling the size. So if you walk around our facilities, we built the playground, we built the soccer fits. We moved it within six months so we can build the new next building.

SCHMITZ: And for any place growing this quickly, there are growing pains.

(SOUNDBITE OF FACTORY MACHINE AMBIENCE)

SCHMITZ: Outside Haiphong, back in Anphat's plastic bag factory, Dan Krassenstein is wrapping up his inspection when he realizes he needs to go back to the factory floor to check something. It's break time. Lights are off and a manager turns them back on so that Dan can see. As he scans the lit factory floor, the finished bags start moving. Workers are inside them sleeping. This is a big no-no.

KRASSENSTEIN: Look around here. People are sleeping inside finished bag. This is a problem. You need to have area where they can rest, but the human body should never touch the finished bag. I see people over there with hair exposed, sleeping inside the bag. It's contamination. So this is a lot of training.

SCHMITZ: And Anphat's sales director Jessica Hien says they're ready to learn.

HIEN: It is also very helpful that he saw the problem. Even we know that, like, for the worker attitude and everything. But somebody from outside come in and show here, this one is not OK, this one is OK.

SCHMITZ: They'll have to learn fast. By the end of 2019, Anphat will have a new factory, and it plans to more than triple its workforce from 300 to 1,400 people. That's a lot of training. But in a place that's growing as fast as Vietnam, Hien says it will be done. Rob Schmitz, NPR News, Haiphong, Vietnam.

Copyright © 2019 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.