New connections

The world trade structure has changed significantly over the past 30 years, Huang Qifan, vice-chairman of the China Center for International Economic Exchanges and former mayor of Chongqing, said in a 2019 lecture at Fudan University.

Finished goods accounted for 70 percent of international trade in the 1980s and '90s.

In 2010, around 60 percent was in intermediate goods, such as parts and raw materials. The number had increased to more than 70 percent by the end of 2018.

And the proportion of trade in services versus goods has increased, Huang says.

In this context, China's manufacturing supply chains are not only large scale but also specialized and flexible, and competitive in cost control.

It's likely that factories will relocate some of the more labor-intensive production rather than supply chains to Vietnam. And the Sino-US trade war is accelerating the transfer, Shi says, adding that the cost of land and utilities in Vietnam can be even higher than in China.

Statistics from the General Administration of Customs show that while the value of China's imports from and exports to the United States dropped by 10.7 percent in 2019, the value with countries that belong to the Association of Southeast Asian Nations increased by 14.1 percent.

Vietnam achieved an export surplus of $4 billion in the first half of this year, and its export turnover with the US reached over $30 billion, a 10.3 percent increase compared with the first half of 2019, while the country's imports from China were worth nearly $35 billion, a 2.2 percent decrease, according to the Vietnamese government's website.

China has been Vietnam's largest trading partner since 2004. Bilateral trade exceeded $100 billion in 2018 and 2019, according to official statistics.

Shi points out in his new book that Chinese managers are important links between Chinese supply chains and Vietnamese production that Chinese scholars often overlook.

"Chinese managers" refers to people from China who have been moving to Vietnam with their factories since the 1990s.