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American media: great reversal, manufacturing industry has returned to China from Vietnam
Source:American quartz financial network | Author:Lynette | Published time: 2021-09-23 | 1233 Views | Share:

In recent years, some enterprises have moved their manufacturing business from China to neighboring Southeast Asian countries. Among them, Vietnam is one of the most popular destinations for opening new factories. But now, after the severe epidemic led to the closure of factories across Vietnam, these enterprises have moved their factories back to China.

After months of containment of the epidemic in Vietnam, the concerns of executives are echoing in the company's earnings conference call. "A CEO told me that the supply chain he spent six years (in Vietnam) building was abandoned in six days," said Rawlings, CEO of designer brands, an American Footwear Group. "Think about how much efforts you have made to leave China, but now one of the (few) places where you can get goods is China. It's crazy, (as if) Everyone is on a roller coaster.

Delta strain is rampant, which makes Vietnam with a complete vaccination rate of only 4% overwhelmed. The closure of factories across Vietnam has led to a sharp drop in Vietnam's manufacturing output and began to erode the profits of global brands. Adidas, for example, said the delay in production in Vietnam would reduce its sales by $600 million this year.

In response to the difficulties, some enterprises are reversing their move to Vietnam as soon as possible. In a September earnings conference call, Robertson, CEO of Lakeland industries, a protective clothing manufacturer (USA), said that the company had hired new executives to help "transfer production from Vietnam to China in a few weeks". Some companies take a more cautious approach. "We do carry out a lot of diversification work outside Vietnam," said the CEO of Hehe she (Italian furniture enterprise), "frankly, we return to China to some extent when necessary".

Some executives are not in a hurry to return to China. Because rebuilding the supply chain in China is expensive and time-consuming, and the tariffs imposed by the United States on Chinese goods should also be considered. However, Jeremy Hoff, CEO of lovesac, a furniture manufacturer, said in a recent earnings conference call that the company had to transfer production from Vietnam to China. "We know that inventory goods from China are affected by tariffs. But this (at least) allows us to have inventory, which is extremely important for us and customers.".

For many enterprises, returning to China is definitely the "worst" option, because with the coming holiday shopping season (Christmas and new year's day), they have to increase production. After all, China has built a reputation for stability during the epidemic. Shi Zhaowei, a professor of management at Harvard University, said that some enterprises began to return to China as early as last year. "There are many examples in this regard. The key problem is that if you want a reliable manufacturing industry, China is usually the best choice."

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