By Ruben Nag
 |
| Cover Image Attribute: Pixabay.com |
There is a quiet shift
rippling through the arteries of global trade, one not marked by declarations,
but by the hum of container ships, customs clearances, and recalibrated
contracts. After years of overreliance on a single manufacturing nucleus, the
world’s multinationals are learning an old truth in a new way: too much
dependence on one engine can stall the whole machine. The term that now defines
boardroom strategy decks and investor calls is the “China + 1” model, a polite
way of saying “we need options.”
When global supply
chains fractured during COVID and geopolitical fault lines deepened, firms
didn’t rush to abandon China; they sought a counterbalance. The +1
wasn’t rebellion, it was risk management. But as the search for that “+1”
unfolded, two names began to echo more than others: Vietnam and India. Both
democratic in structure, young in workforce, and hungry for investment. Yet
one, for now, has run ahead while the other is still tightening its shoelaces.
The reasoning becomes
clearer when one looks at how proximity and policy dance together. In the Rhodium Group’s analysis of post-pandemic trade realignment, China’s centrality to global manufacturing remains unshaken, but the cracks are visible.
Rising labor costs, sanctions pressure, and export controls have made firms
uneasy. For investors, the first instinct was not to move far but to move next
door. Vietnam’s northern border connects directly to China’s industrial
heartlands, allowing raw materials and intermediate goods to flow smoothly. That
border, 1,281 kilometers of concrete reassurance, has become one of the most
valuable supply chain assets on the planet.
Proximity, however,
only explains convenience. What turns geography into strategy is execution. The
DHL study on “China Plus One: How
Does Vietnam Benefit?” shows how Vietnam’s early bet on free trade integration has paid off.
Membership in the RCEP, CPTPP, and the EU–Vietnam Free Trade Agreement gives
its exporters preferential access to over fifty major markets from Tokyo to
Berlin. Those treaties aren’t just legal footnotes; they are bridges that lower
tariffs, ease certification, and cut paperwork. While India still debates its
role in RCEP, Vietnam is already shipping container loads under it.
The result is visible
on factory floors. In Bac Ninh, and Thai Nguyen, sprawling Samsung complexes
produce roughly half of the company’s smartphones. Apple suppliers such as
Foxconn, Pegatron, and Lux share are extending their footprints, moving entire
assembly lines south of the Chinese border. And as the Vietnam Briefing analysis notes, this is not just a wave of opportunism
but a decade-long buildup. Vietnam began constructing plug-and-play industrial
parks years before the pandemic. It kept corporate taxes at about 20 percent,
maintained currency stability, and made FDI procedures refreshingly
predictable. In a world addicted to bureaucratic red tape, Vietnam offered a
clean sheet.
India, by contrast,
offers a more complicated promise. On paper, its fundamentals look unbeatable:
a vast domestic market, an English-speaking workforce, and a government loudly
proclaiming, “Make in India.” Yet for all the announcements, the ground reality
often stumbles on logistics. Moving goods across Indian states can feel like
crossing small republics with their own tariffs and delays. Land acquisition is
labyrinthine, power reliability is uneven, and infrastructure spending is still catching
up. Investors whisper what bureaucrats already know: India’s greatest
opportunity is often trapped in paperwork.
The difference shows
up in the numbers. Manufacturing contributes roughly 25 percent to Vietnam’s
GDP but only 17 percent to India’s. Logistics costs in India hover near 13–14
percent of GDP; in Vietnam, they are closer to 9 percent. Even McKinsey’s global FDI research points out that new capital commitments in
Southeast Asia overwhelmingly favor nations with ready-made export corridors. Between
2022 and 2024, Vietnam’s greenfield manufacturing investments grew by over 40
percent, second only to Indonesia. India’s share rose too, but more in services
and backend operations than in physical manufacturing.
And yet, this isn’t
just about who wins the next investment headline. Beneath the numbers lies a
deeper design the way nations internalize globalization. Vietnam’s model is
efficiency first: attract FDI, make exports frictionless, and keep politics
quiet. India’s model is aspiration first: build domestic champions, aim for
scale, then open the gates selectively. Both approaches reveal a paradox: Vietnam’s speed comes from external dependence; India’s slowness comes from
internal independence.
For the multinationals
now redrawing supply chain maps, Vietnam has become the “fast answer.” When
Apple decided to diversify, it didn’t need to reinvent assembly from scratch;
it could tap into clusters already built for Samsung. The Source of Asia overview describes how industrial zones like Hai Phong
and Dong Nai now function as self-contained ecosystems, encompassing power, ports, skilled workers, housing, and customs clearance, all under one management. That
efficiency is seductive. A procurement manager can land in Hanoi on Monday and
have a production line humming by the next quarter. In India, the same process
could take years.
Still, Vietnam’s
miracle carries a warning label. A population of just under 100 million can
only supply so much labor. Wages in industrial clusters are climbing 8–10
percent annually. Land scarcity around Ho Chi Minh City and Bac Ninh has driven
property prices to record highs. When the Beroe whitepaper on supply chain
resilience examined
“China Plus One” execution bottlenecks, Vietnam’s biggest vulnerabilities were
exactly these: infrastructure strain and overdependence on foreign capital.
Almost 70 percent of its exports are still produced by foreign-owned firms.
That means prosperity rides on decisions made in Seoul, Cupertino, and Tokyo
more than in Hanoi.
India’s challenge is
the mirror image. It faces excessive domestic demand, numerous competing regulations, and multiple veto points. But once a firm does break through, the
scale is unmatched. The “China + 1” conversation might evolve into “China +
Vietnam + India” with Vietnam taking the speed premium and India owning the
volume play. One could call it division of labor by geography: Vietnam for
now, India for scale.
Academic voices
predicted this sequencing years ago. The research paper ‘A China Plus One
Strategy: The Best of Both Worlds’ argued that diversification works best when firms pair an efficient
China hub with a large-scale emerging market. The first mitigates geopolitical
risk; the second builds long-term growth potential. By that logic, Vietnam and
India are not rivals but complements if only their policymakers see it that
way.
The two countries even
share similar demographic curves but different maturities. Vietnam’s working-age population is peaking; India’s is still swelling. That means Vietnam’s
“cheap labor” advantage will erode sooner, while India’s is just coming
online. Investors chasing the lowest cost per unit may flock to Vietnam now,
but investors betting on decade-long stability will have to look westward across
the Bay of Bengal.
There is also the
question of political geometry. Vietnam’s single-party system offers
predictability that boardrooms adore. Policies don’t swing wildly with
elections. India’s democracy, by contrast, offers accountability but also
unpredictability. Incentives vary by state; central and regional priorities
often collide. Yet in a world where geopolitical neutrality matters, Vietnam’s
careful diplomacy, maintaining close economic ties with China while deepening defense cooperation with the U.S., has made it appear like Asia’s Switzerland.
India, assertive and outspoken, plays on a bigger chessboard, balancing
alliances through the Quad and BRICS simultaneously.
These contrasts give
the narrative its complexity. One cannot simply declare a winner. Vietnam’s
short term momentum is undeniable, but its medium-term constraints are visible.
India’s short-term bureaucracy frustrates investors, but its long-term demographic
and consumption tailwinds are immense. The story isn’t “Vietnam versus India”
so much as “Vietnam now, India next.”
To understand where
this all leads, it helps to remember why the “China + 1” model exists at all.
When a few cities in Hubei went into lockdown in early 2020, assembly lines
from Munich to Monterrey came to a standstill. Supply chains discovered their fragility in
real time. Firms that had optimized for efficiency suddenly craved resilience.
As one strategist put it, “single source dependency is the new single point of
failure.” The pandemic merely exposed what geopolitics would later accelerate.
That realization has
not faded. Trade corridors are now being redrawn not for speed alone but for
redundancy. The Beroe paper notes that companies are adopting a
“multimodal” approach, locating parallel manufacturing bases to absorb shocks. In
that configuration, Vietnam often becomes the first node, India the second.
Both will matter; neither can afford complacency.
Yet amid all this
macro logic, there’s something poetic about Vietnam’s rise. A generation ago,
it was synonymous with war and reconstruction; now it stands for manufacturing
excellence. The cranes over Hai Phong Port tell a story not of ideology but of
iteration how a small nation learned to punch above its weight by mastering
efficiency. Every container that leaves its docks whispers a reminder: small
can be mighty if organized well.
India, meanwhile,
continues its uneasy dance between potential and performance. Its policymakers
know what needs fixing: logistics, land, and labor laws, yet the very structure of
federal democracy makes reform painstakingly slow. Still, India holds a trump
card: it is not only a supplier but a market. In a world increasingly wary of
export dependence, that distinction matters. Firms building in India can sell
in India. Vietnam cannot say the same at comparable scale.
Perhaps the wisest
outlook is not to view this as competition but as choreography. The Rhodium Group’s data suggests China’s share of global electronics
exports may decline modestly but not collapse. As that adjustment unfolds,
supply chains will settle into regional clusters East Asia around China and
Vietnam, South Asia around India and Bangladesh. Rather than replacing China,
both nations will orbit it differently: Vietnam as the agile satellite, India
as the gravitational anchor.
Still, speed matters.
The first mover often sets the standards others must follow. Vietnam’s early
head start in EV components and semiconductor packaging, for instance, could
make it indispensable to future technologies. The McKinsey study emphasizes how global FDI is clustering around
“industries of the future.” If Hanoi manages to climb that value chain while
keeping its macro balance, it could cement its place as the ASEAN powerhouse
that outpaced even larger democracies.
But let’s not
romanticize efficiency too much. Economic miracles often hide fragile
foundations. Vietnam’s overreliance on FDI-led growth leaves it vulnerable to
sudden reversals of sentiment. A geopolitical flare-up or trade shock could slow
inflows dramatically. India, for all its frustrations, has a thicker cushion: a vast domestic economy, an agricultural base, and a growing services export surplus
that softens external shocks.
One suspects the
eventual equilibrium will look like this: Vietnam will dominate in high-speed, high-volume consumer electronics, textiles, and light manufacturing; India will lead in autos, pharmaceuticals, heavy machinery, and tech-linked hardware.
Together, they could rewire the world’s production topology if they collaborate
rather than compete.
In the end, the “China
+ 1” story isn’t only about economics. It’s about how countries interpret vulnerability
and opportunity. Vietnam responded with agility, India with ambition. Both are
trying to translate history into strategy. The outcome won’t just decide where
the next iPhone is assembled or where the next EV battery is packed; it will
determine which nations define the grammar of global resilience in the 21st
century.
For now, Vietnam has
the wind at its back. But as every sailor knows, winds change. The question is
which vessel has the deeper keel when they do.
About the Author:
Ruben Nag is a Strategy Consultant at IBM, Kolkata, specializing in global finance and supply chain strategy. With over nine years of experience, he focuses on solving complex problems, driving results, and creating real value across industries.
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