The reconfiguration of global supply chains in recent years is no longer a short-term phenomenon. For many Chinese enterprises, expanding into Vietnam has ceased to be merely an alternative option — it has become part of a long-term strategy to diversify markets, optimize costs and access free trade agreements.
Yet market opportunity is only half of the picture. The other half lies in the ability to manage risk in a new legal and operating environment.
1. Vietnam Is More Than a Low-Cost Destination
A common view is that Vietnam attracts investment thanks to low labour costs and investment incentives. That is true, but incomplete. Vietnam is shifting from a cost-based investment attraction model toward one focused on quality, compliance and sustainable development. That means:
- Environmental requirements are becoming stricter, particularly for manufacturing projects with emissions;
- Tax and transfer pricing scrutiny is intensifying, especially for cross-border related-party transactions;
- Labour standards are being tightened under the international commitments Vietnam has signed.
Enterprises expanding into Vietnam should prepare for a legal environment that is improving rapidly, rather than expecting the flexibility of earlier years. See Roadmap to the Vietnamese Market for Chinese Investors.
2. The Trend Toward M&A Instead of Greenfield Investment
Instead of building factories from scratch, many investors are choosing to acquire operating companies or lease ready-built workshops in industrial parks. The reasons are clear:
- Shorter deployment time — sometimes just a few months instead of several years;
- Immediate use of the target company’s existing licences and operating systems;
- Reduced risk around planning and land — the two stages that typically take the longest in greenfield projects.
However, a fast transaction does not mean low risk. Unpaid tax liabilities, labour disputes or legal issues relating to land use rights can directly affect the value of the investment if they are not properly assessed. In this context, the ability to evaluate risk before the deal becomes the decisive factor. See M&A for Chinese Investors.
3. Industrial Real Estate: A Strategic Asset, Not Just a Factory Floor
The development of industrial real estate in Vietnam offers investors many options. Yet the differences between industrial parks go beyond geography. Factors that should be considered strategically include:
- The remaining term of land use rights and the possibility of extension upon expiry;
- Conditions for transfer or sub-lease when restructuring is needed;
- Financial obligations arising throughout the project’s life cycle, not just the initial rent;
- Infrastructure and room for future expansion — where will the phase-two factory be built?
The decision to lease or acquire land use rights should be made with a long-term perspective, especially for manufacturing projects with large investment cycles. Land is the least liquid asset in an investment structure — a wrong choice is very expensive to fix. See Leasing Land and Workshops in Industrial Parks for Chinese Investors.
4. Internal Governance in a Multicultural Environment
Differences in business culture and legal systems can create gaps in internal governance, particularly where local shareholders or partners are involved. The problems that typically arise are not in commercial contracts, but in:
- The delegation and internal control mechanism — who may sign, and up to what limits;
- A clear division of decision-making authority among the board of directors, the general director and shareholders;
- Mechanisms for resolving disagreements among shareholders when their interests no longer align.
Designing a clear governance system from the outset helps limit conflicts and protects the investor’s control in the long run. See Setting Up a Subsidiary in Vietnam for Chinese Groups.
5. Long-Term Investment Thinking Over Short-Term Reactions
The Vietnamese market offers significant growth potential, but also requires thorough legal and governance preparation. Successful enterprises are usually not the fastest to deploy, but those that:
- Understand the legal structure of the investment, from the investment registration certificate down to each sub-licence;
- Fully assess risks before committing capital, rather than discovering them after the capital has been spent;
- Build a transparent internal control mechanism that works even when management changes;
- Actively prevent problems rather than fixing consequences — because prevention always costs less than remediation.
In an increasingly competitive environment, managing legal risk is no longer a support function; it has become part of the growth strategy.
6. Leveraging Free Trade Agreements: An Advantage to Be “Designed”, Not Given
Many Chinese enterprises choose Vietnam because of the network of free trade agreements Vietnam participates in — the CPTPP, EVFTA, RCEP and bilateral FTAs. But tariff preferences do not fall into a company’s lap automatically: goods must satisfy rules of origin, and proving origin requires a documentation system designed from the raw-material purchasing stage.
Yet many manufacturers in Vietnam still fail to enjoy these preferences because their materials do not meet the regional value content ratio, or because they have not kept sufficient documentation to prove origin. FTA advantage must be calculated from the supply-chain design stage — that is a joint task of procurement, accounting and legal, not something to “figure out later”.
7. Environment, ESG and “Green” Permits: A New Compliance Cost
Ten years ago, environmental permits were just one step in an investment dossier; today they have become a condition for a manufacturing project’s survival. Requirements on environmental impact assessment, wastewater discharge permits and hazardous waste management are increasingly detailed, and the sanctions for violations are severe enough to shut down a factory.
For Chinese enterprises in textile dyeing, plating, chemicals and recycling — industries Vietnam is tightening control over — preparing environmental dossiers seriously from the outset is no longer optional.
8. People: Bringing in Experts and Building a Local Team
Most Chinese enterprises entering Vietnam initially send a team of managers and technicians from China to operate the first phase. But every foreign specialist means a work permit dossier, a visa/temporary residence card matter, and a personal income tax obligation to be calculated correctly.
Enterprises should simultaneously build a “localization” roadmap for their teams: training Vietnamese managers to gradually reduce dependence on foreign specialists — lowering both costs and compliance risks. See Compliance for Chinese Managers Working in Vietnam.
9. Tax and Transfer Pricing: A Problem to Solve from Day One
Chinese enterprises in Vietnam typically have close dealings with their parent companies or affiliates: purchasing raw materials from the group, paying royalties and management fees, and intra-group borrowing. All of these transactions are under the tax authorities’ transfer pricing scrutiny.
The principle is simple: related-party prices must be as if between independent parties, and the enterprise must have documentation to prove it. Alongside this are foreign contractor tax obligations on payments to overseas parties, and the use of the Vietnam–China double taxation agreement to optimize legally. The transaction structure designed by legal and finance will determine the final tax bill. See Tax Compliance for Chinese Enterprises in Vietnam.
10. Disputes: Prepare for the Worst-Case Scenario While Things Are Still Good
No enterprise signs a contract expecting to sue, but wise enterprises always prepare for that scenario. For Chinese enterprises in Vietnam, disputes typically arise from three sources: local commercial partners, internal shareholder disputes, and disputes with state authorities over tax, land and the environment.
The dispute resolution clause — court or arbitration, which governing law, and for bilingual Vietnamese–Chinese contracts which language prevails when interpretation conflicts — can only be effectively designed at signing. Once a dispute erupts, all choices are locked in. See Dispute Resolution for Chinese Investors in Vietnam.
11. Exit Strategy: The Way Out Must Be Designed Like the Way In
Few investors think about exit on the day they invest, but the structure chosen today will determine the cost and feasibility of withdrawing capital tomorrow. Transferring shares to a new partner, selling the project, or closing down and liquidating — each option has a different legal and tax map.
Transfer restriction clauses can block a share sale; tax obligations on a project transfer can “eat” a significant part of the deal value; and enterprise dissolution procedures in Vietnam often take much longer than expected. A complete expansion strategy always includes a withdrawal plan — not out of pessimism, but as disciplined capital management.
12. The Role of Legal Counsel Throughout the Project Life Cycle
Enterprises that hire lawyers on a case-by-case basis often spend more on legal costs than those with ongoing counsel — because cases always cost more than prevention. Ongoing counsel participates in everyday decisions: a new contract clause, a management personnel change, an intra-group transaction.
See Legal Risk Checklist for Chinese Investors.
Frequently Asked Questions
Should a Chinese enterprise choose M&A or greenfield incorporation when entering Vietnam?
There is no one-size-fits-all answer. M&A shortens the timeline and leverages existing licences and systems, but requires careful due diligence on outstanding tax, labour and land issues. Greenfield incorporation is legally clean but time-consuming and must go through the full procedure from scratch. The decision should be based on due diligence of each specific deal, not on the psychology that “fast is good”.
What is the biggest risk for Chinese investors in Vietnam today?
Three risk groups stand out: tax and transfer pricing compliance in intra-group transactions; land law and industrial park issues; and multicultural internal governance. All three are “accumulating” risks — they erupt when there is an inspection or an internal disagreement.
Do FTA tariff preferences apply automatically to goods manufactured in Vietnam?
No. Goods must satisfy the rules of origin of each agreement, and the enterprise must have documentation to prove it. Supply-chain design — supplier selection, regional value content ratio, document retention — must factor in this requirement from the start.
When should an enterprise start preparing transfer pricing documentation?
From the first fiscal year with related-party transactions, not when an inspection notice arrives. Comparable data and documentation proving arm’s-length pricing must be collected throughout the transaction process, because they are very difficult to reconstruct later.
Does a small enterprise need ongoing legal counsel?
The smaller the enterprise, the more it needs one, because a single mistake can threaten the survival of the entire project. What matters is having someone review decisions before they are made, rather than dealing with the aftermath.
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Legal sources and update timing: Content standardized against official legal sources reviewed on 20/08/2026, including the Law on Enterprises No. 59/2020/QH14 (effective from 01/01/2021) as amended and supplemented by Law No. 76/2025/QH15 (effective from 01/7/2025) with new provisions on beneficial owners and responsibilities of legal representatives. Applicability may vary by transaction type, sector, locality and specialized guiding instruments.
To assess the dossier, eligibility, obligations and implementation plan for your situation, please contact Flat Law Firm via contact, (+84)988 424 851 or info@flaw.vn.
