CHINA FDI IN VIETNAM

China FDI in Vietnam is usually discussed as a flow of capital. The part that decides whether a particular project survives is duller and more useful: the order in which the permits are issued.

A decided case on how China FDI in Vietnam goes wrong

Judgment No. 08/2024/KDTM-PT of 11 March 2024 — Superior People’s Court in Ho Chi Minh City, factory lease dispute in a Binh Duong industrial park.

A foreign-invested manufacturer leased 30,391 m² of factory and office space for five years at USD 2.8 per square metre per month, and paid the first deposit instalment of VND 6,691,142,270. The lease said the landlord would hand over “the necessary documents” for the tenant to obtain its licence — but never listed them. When the licence did not arrive, the tenant treated the landlord as in breach and sued for its deposit back plus VND 1,202,175,228 of interest.

The Court of Appeal dismissed the claim in full under Article 308(1) of the Civil Procedure Code, applying Articles 4, 298 and 315 of the Commercial Law and Articles 328, 404 and 405 of the Civil Code. Because the wording was open, the court read it against the documents the Investment Law, the Enterprise Law and the provincial industrial-zone authority actually require — not the list the tenant assumed. The lease penalised early termination by the landlord and said nothing about the tenant, so the deposit fell to be treated under Article 328.

For an inbound investor from China or anywhere else, the sequence is the lesson. Name every permit document in the lease, by title and issuing body, before money moves; and treat a deposit paid before the investment registration certificate is in hand as money at risk on your own timetable, not the landlord’s.

The legal basis behind China FDI in Vietnam

• Investment Law, Law No. 143/2025/QH15, in force 1 March 2026 — Article 8 on market access, the investment registration certificate, and registration before an ownership change.
• Enterprise Law, Law No. 59/2020/QH14 — the company the investment runs through.
• Land Law, Law No. 31/2024/QH15 — land and premises for the project, and the conditions attached to leased land.
• Commercial Law and Civil Code, Law No. 91/2015/QH13 — the lease and the deposit.

Decided cases are published on case.unilaw.vn. Market entry sits with our Vietnam investment lawyers.

Introduction to China’s Foreign Direct Investment in Vietnam

China’s foreign direct investment (FDI) in Vietnam has grown consistently over the years. Vietnam’s strategic location, favorable investment policies, and integration into global trade networks have made it an attractive destination for Chinese investors. Key sectors include manufacturing, real estate, and technology-driven industries, creating significant opportunities for local and foreign enterprises alike.

Key Drivers of Chinese Investment in Vietnam

Geographical Proximity and Trade Efficiency

One of the most significant factors contributing to the growth of Chinese investments in Vietnam is the geographical proximity between the two countries. Sharing a border facilitates smoother logistics, reduced transportation costs, and efficient trade routes. This advantage allows Chinese companies to establish supply chains and access Vietnam’s resources quickly, creating a favorable environment for businesses looking to expand their operations across Southeast Asia.

The proximity also enables frequent interactions and collaborations between business entities from both nations. This ease of access further strengthens bilateral economic ties and fosters mutual growth, making Vietnam an attractive destination for Chinese investors seeking to optimize their operations.

Political Stability and Government Support

Vietnam’s political stability serves as a critical factor in attracting Chinese foreign direct investment (FDI). In a region where political uncertainty can pose risks to businesses, Vietnam has consistently demonstrated a stable governance framework, ensuring predictability and security for foreign investors. This environment provides confidence for Chinese companies to commit to long-term investments in various industries.

Additionally, Vietnam’s government actively supports foreign investments through favorable policies, tax incentives, and streamlined procedures for setting up businesses. These measures align with the country’s broader strategy to integrate into the global economy, further enhancing its appeal as an investment destination for China.

Leveraging Free Trade Agreements

Vietnam’s participation in international free trade agreements (FTAs), such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP), plays a pivotal role in attracting Chinese investments. These agreements provide Vietnamese-based businesses with preferential access to global markets, enabling Chinese investors to benefit indirectly from reduced tariffs and expanded trade opportunities.

By establishing operations in Vietnam, Chinese companies can tap into these trade advantages to export goods and services to regions such as North America, Europe, and the Asia-Pacific. This strategic positioning is particularly appealing for businesses aiming to diversify their export markets while reducing dependency on traditional routes.

Infrastructure and Industrial Development

Chinese investments in Vietnam often focus on infrastructure and industrial development. Significant projects such as industrial parks, high-tech zones, and real estate developments underline the scale and ambition of these investments. For instance, industrial parks funded by Chinese companies have become hubs for advanced manufacturing, contributing to Vietnam’s economic transformation and job creation.

In addition to industrial projects, Chinese-backed infrastructure initiatives, including roads, bridges, and ports, enhance Vietnam’s connectivity and logistical capabilities. These improvements not only benefit Chinese investors but also support Vietnam’s broader economic development goals, reinforcing the mutually beneficial nature of this collaboration.

Energy and Sustainability Initiatives

Another area where Chinese investments are making a significant impact is the energy sector. With a focus on renewable energy, such as solar and wind projects, Chinese companies are aligning their efforts with global sustainability goals. This commitment to green energy not only addresses environmental concerns but also positions Vietnam as a leader in clean energy adoption within the region.

Such investments reflect a strategic alignment between Vietnam’s aspirations for sustainable growth and China’s expertise in renewable energy technologies. These projects also contribute to energy security in Vietnam, ensuring a reliable and sustainable power supply to support its growing industrial and urban demands.

Collaborative Opportunities for Growth

Chinese investments in Vietnam open up numerous opportunities for collaboration between businesses from both nations. Joint ventures, knowledge sharing, and technology transfers are just a few examples of how these partnerships create value. By leveraging China’s advanced technologies and Vietnam’s skilled workforce, these collaborations foster innovation and competitiveness in industries such as electronics, textiles, and machinery.

Moreover, the integration of Chinese companies into Vietnam’s economy facilitates cultural and economic exchanges, further strengthening the relationship between the two countries. This synergy not only enhances mutual understanding but also creates a foundation for sustained economic growth in the long term.

Conclusion

Several factors drive the surge in Chinese investments in Vietnam, including geographical proximity, political stability, government support, and participation in free trade agreements. These elements collectively create an attractive environment for Chinese investors seeking to expand their global footprint. By focusing on key sectors such as infrastructure, manufacturing, and renewable energy, Chinese companies are contributing to Vietnam’s economic development while benefiting from its strategic advantages. This dynamic relationship underscores the potential for continued collaboration and shareBenefits of Chinese FDI in Vietnam

Chinese investments have brought numerous benefits to Vietnam. These include job creation, technology transfer, and improved infrastructure. Moreover, Chinese companies often partner with local firms, fostering knowledge exchange and enhancing the competitiveness of Vietnamese businesses. The development of industrial clusters due to Chinese FDI has further solidified Vietnam’s position as a manufacturing hub in Southeast Asia.

Challenges and Concerns

Despite its advantages, China FDI in Vietnam also poses challenges. Environmental concerns, labor rights issues, and the potential for economic dependence are significant topics of debate. Local businesses may struggle to compete with larger Chinese firms, leading to unequal economic benefits. Additionally, geopolitical tensions occasionally impact bilateral economic relations.

Strategic Recommendations

To maximize the benefits of Chinese FDI, Vietnam must adopt strategic approaches. Strengthening legal frameworks to ensure compliance with environmental and labor laws is essential. Additionally, encouraging diversification of investments across regions and sectors will help distribute economic benefits more evenly. Building robust partnerships between Chinese and Vietnamese companies can also foster sustainable growth.

Future Outlook

As global supply chains evolve, China FDI in Vietnam is expected to grow further. The rising demand for green energy and technological innovations will likely attract new investments in emerging sectors. Vietnam’s commitment to improving its business environment and its strategic location will ensure its continued appeal to Chinese investors.