It’s not either-or — the smart strategy is parallel: keep China running steadily while building Vietnam up, then wind China down gradually. This article is the master playbook — wrapping up the whole relocation theme.
1. Parallel thinking: why not jump at once?
- Jump risk: closing China before Vietnam is stable — losing customers and cash flow;
- Parallel: China funds Vietnam — Chinese profits finance Vietnamese investment;
- Flexibility: markets shift — adjust the weighting;
- Leverage: two supply sources — better bargaining with customers;
- Reality: most successful groups move step by step.
2. Capital allocation: how much for Vietnam?
- Rule: fund Vietnam from retained earnings — don’t over-borrow;
- Share: year one 20–30% of the investment budget — growing;
- Priority: infrastructure first — buildings, machines;
- Reserve: keep a contingency fund — overruns always happen;
- Discipline: don’t drain China’s working capital dangerously.
3. Order allocation: how to split?
- Year 1: Vietnam takes 10–20% — simple, low-risk orders;
- Year 2: Vietnam takes 30–50% — more complex orders;
- Year 3+: Vietnam becomes the main site — China keeps special orders;
- Rule: customers decide — which order goes where follows their requirements;
- Backup: always keep spare capacity on both sides.
4. People allocation: who goes, who stays?
- To Vietnam: the best — top managers and engineers — building the foundation;
- In China: keep the operating team — maintaining production;
- New hires: Vietnamese staff — trained into the core;
- Rotation: rotate people between sites — sharing experience;
- Retention: policies keeping top talent in both places.
5. Decision milestones: when to shrink China?
- Milestone 1: Vietnam matches Chinese quality — customers acknowledge;
- Milestone 2: Vietnam sustainably profitable — no more subsidies;
- Milestone 3: Vietnamese supply chain self-sufficient — independent of China;
- Milestone 4: orders stably shifted to Vietnam;
- Decision: all four met — start shrinking China.
6. Governing two entities
- Structure: parent — two subsidiaries (China, Vietnam);
- Transfer pricing: intercompany deals — market prices, full documentation;
- Cost allocation: shared costs (R&D, brand) — allocated reasonably;
- Reporting: consolidated — seeing the whole;
- Audit: independent audits both sides — transparency.
7. Risks of the parallel model
- Double costs: carrying two organisations — expensive;
- Internal rivalry: two plants competing for orders — friction;
- Stretched leadership: management running two places — exhaustion;
- Transfer pricing: tax authorities scrutinising — in both countries;
- Governance: needs high management discipline.
8. If markets reverse
- Tariffs fall: if barriers drop — China may compete again;
- Vietnam costs rise: wages and land rising — eroding the edge;
- Geopolitics: tensions escalating — Vietnam worth more;
- Response: stay flexible — don’t lock into one scenario;
- Periodic: review the strategy annually.
9. Lessons from those ahead
- Lesson 1: don’t rush — the hasty usually pay dearly;
- Lesson 2: people are the key — machines are buyable, great people aren’t;
- Lesson 3: customers come along — don’t move and lose them;
- Lesson 4: legal from day one — don’t let legal trouble block the way;
- Lesson 5: patience for 3–5 years — no shortcuts.
10. Parallel-playbook checklist
- 3–5 year strategy — written down?
- Capital, order and people allocation — clear?
- 4 China wind-down milestones — set?
- Two-entity governance — transfer pricing OK?
- Periodic review — annual schedule?
11. KPIs for tracking both sites
- Production: productivity, defect rates, on-time delivery — comparing plants;
- Finance: revenue, profit, cash flow — per entity;
- People: attrition, hiring lead time — both countries;
- Customers: satisfaction scores — by supply source;
- Cadence: monthly reporting — leadership compares.
12. Decision rights: who decides what
- Strategy: the parent decides — capital allocation, order weighting;
- Operations: each plant’s director decides — daily production;
- Senior HR: the parent approves — appointments, transfers;
- Thresholds: clear delegation — spending above what needs approval;
- Conflicts: a mechanism for resolving inter-plant disputes.
13. Managing intercompany cash flow
- Centralise: centralised cash management — the parent coordinates;
- Intra-group loans: loan agreements — market rates, registered as required;
- FX: manage currency risk — CNY/VND/USD;
- Reserve: a common contingency fund — for incidents;
- Transparency: report intercompany cash flows — independent audit.
14. Full exit from China: when?
- Condition: Vietnam fully self-sufficient — needing nothing from China;
- Market: assess — is a Chinese-market presence still needed;
- Cost: compare maintenance cost vs benefit — numbers decide;
- Path: exit stepwise — not all at once;
- Door open: keep relationships — the Chinese market may be needed again.
15. Succession: the next generation of leaders
- Pipeline: build a leadership pipeline — in both countries;
- Vietnamese leaders: promote Vietnamese managers — the long-term answer;
- Rotation: rotate high-potentials between plants;
- Mentoring: pair experienced with junior — knowledge transfer;
- Retention: retain the best — equity, career paths.
16. Reviewing the strategy annually
- Annual review: a formal strategy review — every year;
- Assumptions: test the assumptions — costs, tariffs, politics;
- Scenarios: update scenarios — best, base, worst;
- Decisions: decide — accelerate, hold or reverse;
- Document: record the reasoning — for the board.
17. Benchmarking against competitors
- Peers: track what competitors do — China+1 moves;
- Costs: benchmark Vietnamese costs — against peers;
- Speed: compare ramp-up timelines — are you slow;
- Learn: learn from others’ mistakes — industry networks;
- Advantage: find your edge — not just cheap labour.
18. ESG across two countries
- Standards: one ESG standard — applied in both plants;
- Reporting: consolidated ESG reporting — customers demand it;
- Audits: audit both sites — no double standards;
- Supply chain: extend standards to suppliers — both countries;
- Risk: an ESG scandal in one plant taints both.
19. The 5-year vision
- Write it: a written 5-year vision — where will you be;
- Vietnam: Vietnam as the growth engine — quantified targets;
- China: China’s role — market, R&D, or exit;
- Milestones: yearly milestones — measurable;
- Commit: leadership commitment — or it stays paper.
20. When the playbook needs rewriting
- Trigger: major shocks — pandemics, trade wars, disasters;
- Review: question the assumptions — not just the numbers;
- Options: generate real options — including retreat;
- Decide: decide fast — slow decisions cost more;
- Communicate: tell the organisation — why the change.
21. Crisis management across two plants
- Plan: a joint crisis plan — both plants;
- Team: a cross-border crisis team — named members;
- Scenarios: drill scenarios — fire, flood, pandemic;
- Communication: one voice — to customers and media;
- Backup: each plant backs up the other.
22. Celebrating milestones
- First shipment: celebrate the first Vietnamese shipment;
- Teams: recognise both teams — Chinese and Vietnamese;
- Customers: share the story — with customers;
- Culture: building one culture — takes celebrations;
- Momentum: milestones fuel the next phase.
23. Telling the parallel story to investors
- Narrative: a clear narrative — why two plants;
- Numbers: show the numbers — costs, returns, risks;
- Timeline: a credible timeline — to full transition;
- Risks: disclose risks honestly — credibility;
- Update: regular updates — as milestones hit.
24. One-page parallel strategy summary
- Vision: one sentence — where you’re heading;
- Split: today’s China/Vietnam split — and the 3-year target;
- Milestones: four wind-down milestones — with dates;
- Owners: named owners — for each workstream.
25. Final word: patience wins
- Remember: every successful relocation took years — not months;
- Steady: steady progress beats rushed moves;
- Supported: get good advisers — on both sides of the border.
Contact us
FLAT Law Firm advises Chinese investors throughout the Vietnam investment cycle — from deal structuring and licensing to operations and compliance. Contact us for advice tailored to your project.
This article has been quality-reviewed by the FLAW AI Legal Council
