Vietnam's rising FDI flows from China and Singapore ahead of Trump II

We have written previously about ASEAN nations benefiting from their role as "connector economies" as companies seek to avoid US-China trade friction – and whether Donald Trump's second term might place some of this success at risk.

As Trump takes office, Chinese companies operating in Vietnam – which has built up a substantial trade surplus with the US – could face antidumping and countervailing trade measures.

We've charted the sources of long-term foreign direct investment (FDI) in Vietnam, showing how Chinese inflows have steadily become more important. South Korea was the historic investment leader in Vietnam, but China has gradually caught up.

Singapore's growing role is also of note; at times, its accumulated FDI in Vietnam has surpassed that of China. Large companies – including Chinese ones – have increased the importance of their regional headquarters in the city-state, and FDI flows to Vietnam thus often originate there.

Our second chart shows how this acceleration of Chinese FDI has come with changes in Vietnam's trade balance: imports from China (in green) have increased and so have exports to the US (in purple), demonstrating the "connector economy" phenomenon as Vietnam's manufacturing capacity taps Chinese inputs to make goods sent to the American market.

In his first term, Trump branded Vietnam a "currency manipulator;" last year President Biden's administration said this was not the case, but that the exchange rate is being monitored. In the face of potential tariffs from Trump, Vietnam has reportedly vowed to buy more aircraft and liquefied natural gas from the US.

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