Why Vietnam is the Top China+1 Destination for Australian Firms

For Australian companies pursuing a China+1 strategy, Vietnam is a prime option, offering competitive production costs, robust industrial networks, and extensive trade agreements. 

Vietnam has emerged as a primary China+1 destination for Australian firms seeking manufacturing diversification, cost optimization, and supply chain resilience. Its appeal is not based on replacing China but on complementing it, leveraging deep industrial linkages, competitive production costs, and extensive trade agreements. 

For Australian investors, Vietnam represents a dual-platform strategy: 

• A production base for global exports 

• A sourcing hub integrated with Chinese supply chains 

Australia–Vietnam investment landscape 

Australia’s investment footprint is broad but relatively shallow, indicating strong headroom for expansion, especially in manufacturing and supply chain-linked sectors. Data from 2024 confirms steady – though still underpenetrated – Australian investment in Vietnam: 

• 712 Australian FDI projects with total registered capital of ~US$1.9 billion  

• Australia ranks among the top 20 foreign investors in Vietnam in 2025 

• Investment spans manufacturing, agriculture, services, and infrastructure  

• Projects are distributed across the country, including major hubs like Ho Chi Minh City, Hanoi, and Ba Ria–Vung Tau  

Why Vietnam is outperforming as a China+1 destination 

Manufacturing scale + cost competitiveness 

Vietnam’s manufacturing sector is the backbone of its FDI-led growth, supported by: 

• Competitive labor costs relative to China  

• Export-oriented industrial zones (north–south corridor)  

• Strong sector clusters: electronics, textiles, furniture, footwear  

Vietnam has become a global manufacturing node, with major multinational supply chains already anchored in-country. 

Trade agreements favor Australian firms 

Vietnam offers one of the most extensive FTA networks globally, including: 

• Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) 

• EU–Vietnam FTA (EVFTA)  

• Regional Comprehensive Economic Partnership (RCEP)  

For Australian firms, CPTPP alone enables: 

• Reduced tariffs on Vietnam-manufactured goods  

• Improved cost competitiveness vs China imports  

Deep supply chain linkages with China 

Vietnam’s advantage is not decoupling but integration with China’s industrial ecosystem: 

• High dependence on Chinese machinery, inputs, and components  

• Geographic proximity enabling fast cross-border logistics  

• Increasing infrastructure integration (ports, rail, border gates)  

Implication: Australian firms can maintain Chinese supplier relationships while shifting final assembly or export production to Vietnam. 

Infrastructure and industrial ecosystem maturity 

Vietnam’s infrastructure upgrades underpin its manufacturing rise: 

• Industrial parks and export processing zones across key regions  

• Port clusters (Hai Phong, Ho Chi Minh City)  

• Expanding logistics and e-commerce networks  

These factors enable scalable, export-ready production ecosystems, which are critical for Australian SMEs and sourcing firms. 

Sector opportunities for Australian firms 

Vietnam’s alignment with Australian import demand is particularly strong in consumer goods, agri-processing, and light manufacturing. 

Australian companies operating in Vietnam 

Vietnam has attracted a growing base of Australian firms across sectors: 

• Telstra  

• RMIT University  

• ANZ  

• BlueScope Steel  

• BHP  

• Austal  

• SunRice  

• Mavin Group  

These firms operate across manufacturing, education, finance, infrastructure, and agribusiness, reflecting Vietnam’s multi-sector appeal.  

Vietnam as a sourcing hub for Australian SMEs 

For Australian importers and SMEs, Vietnam offers distinct sourcing advantages: 

Key benefits 

• Lower MOQs (minimum order quantities) vs China  

• Greater flexibility for mid-sized production runs  

• Increasing compliance with ethical and sustainability standards  

• Strong export-oriented supplier base  

Key sourcing sectors 

• Furniture and home décor  

• Apparel and footwear  

• Consumer electronics assembly  

• Processed food and agri-products  

Strategic considerations for Australian investors 

Vietnam vs China: Complement, not substitute 

Vietnam’s role is best understood as “China+1 – not China replacement”: 

• China remains dominant in inputs and advanced manufacturing  

• Vietnam specializes in assembly, export manufacturing, and diversification  

Australia’s Southeast Asia Economic Strategy to 2040: How Vietnam can play a key role 

“Invested: Australia’s Southeast Asia Economic Strategy to 2040” was launched in September 2023 by the Anthony Albanese Government. The strategy positions Southeast Asia as central to Australia’s long-term prosperity and security, aiming to substantially grow two-way trade and unlock much higher Australian investment in the region by 2040.  

The strategy identifies Vietnam as a high-growth, manufacturing-driven economy where Australian businesses can scale commercial engagement across multiple sectors. Key drivers include: 

• Rapid industrialization and export growth, positioning Vietnam as a core production base in global value chains  

• Strong participation in regional trade frameworks such as the RCEP and CPTPP 

• Increasing demand for high-quality inputs, services, and technology, areas where Australian firms have competitive strengths 

The strategy outlines several sectors where Vietnam offers immediate and scalable opportunities for Australian firms – as shown in the table below. 

Final advisory 

For Australian firms, Vietnam is no longer an “alternative” market – it is a core node in Asia’s supply chains. 

Winning strategies will focus on: 

• Leveraging Vietnam’s FTA-driven export advantage  

• Maintaining China-linked supply chain integration  

• Building localized production and sourcing ecosystems  

• Aligning with industrial clusters and sector strengths  

In practical terms, Vietnam offers Australian businesses a cost-effective, trade-advantaged, and strategically connected manufacturing base – positioning it as the most viable China+1 destination in Southeast Asia today.