The Hindu: Published on 11th December 2025.
Why in News?
After the United States imposed a 20% tariff, Chinese companies have begun moving into Vietnam on a large scale. Chinese investment is growing at the fastest pace in Vietnam, and Vietnam’s imports from China have reached record levels. Vietnam, which was earlier cautious toward China, is now cooperating with China even in security-sensitive sectors (Huawei, ZTE, COMAC, high-speed rail). This appears to be affecting Vietnam’s U.S.–China balancing strategy — according to experts, the country may become a “torn country.”
Background:
Since the 1990s, Vietnam’s economy has been deeply connected with the United States.
The 1979 war between China and Vietnam and the South China Sea disputes have long been sources of tension.
The U.S. considers Vietnam important in its supply-chain diversification strategy. But in recent years, geopolitical warmth between China and Vietnam has increased.
Key Issues:
(a) Strain in U.S.–Vietnam relations:
Vietnam considered the U.S. tariffs as punitive. This pushed the country economically closer to China.
(b) Security risks:
Sensitive technology contracts given to Huawei and ZTE
Approval for China’s high-speed rail projects and COMAC aircraft
These were previously restricted due to security concerns.
(c) Growing Chinese economic grip:
Vietnam’s imports from China: $168 billion (30% increase)
Heavy import of electronic parts, many of which are re-exported to the U.S.
China’s EV companies (BYD, Yadea) are rapidly capturing market share.
(d) Declining anti-China sentiment among youth:
This is creating a favorable environment for Chinese products and brands.
Key Developments:
(a) China’s wide-ranging expansion
E-scooters (Yadea), electric vehicles (BYD), retail chains (KKV), e-commerce (Lazada, TikTok Shop), technology investments (Tencent).
TikTok is the number-one shopping platform in Vietnam.
(b) Record investment flows:
In 2025 (Jan–Nov): China + Hong Kong investment = $6.7 billion
Chinese presence in the DEEP C industrial park has doubled compared to 2019.
(c) New phase of technology transfer:
Earlier, China was hesitant to share technology, but now many companies are providing technologies such as:
Battery systems
EV technologies
Energy-storage systems
to local partners.
Impacts:
(a) Impact on Vietnam’s foreign policy:
Vietnam’s “balancing diplomacy” is being affected. Its relations with the U.S. and the West may weaken.
(b) Pressure on Vietnamese industries:
Domestic EV company VinFast is facing competition from China’s BYD and Yadea.
Local retailers and e-commerce platforms are competing with Chinese companies.
(c) A new turn in the U.S.–China trade war:
U.S. tariffs have pushed China to look for alternative markets in Asia.
Vietnam is becoming a new production + consumer hub for China.
Strategic Impact:
Vietnam may shift from a “swing state” to a “torn country,” increasing tension between the U.S. and China.
China’s geopolitical position will strengthen, especially in Southeast Asia.
The U.S. Indo-Pacific strategy may face challenges.
The U.S. effort to reduce global supply-chain dependence on China may weaken.
Future Outlook:
