# Export manufacturing and supplier depth in China and Vietnam

Comparative Study · International Trade
China and Vietnam participate in manufacturing supply chains through different combinations of assembly, intermediate production and supporting services. An increase in gross exports establishes more sales across the border at the prices recorded. It does not establish how much additional value was created locally, how many domestic firms supplied the exporter or whether those firms developed capabilities usable elsewhere.

The common comparison in this study is the domestic value added embodied in exports of the same sector, followed by the direct and indirect supplier contributions behind it. This is different from comparing ownership groups or the nationality of the final assembler. It is also different from ranking every industry using one national export-content average.

Textiles and clothing provide an observed sectoral comparison. The evidence is supplemented by institutional analysis of Vietnam's links between domestic and foreign firms. The worked supply-chain account is hypothetical and identifies the additional information required to distinguish local invoices from local production. It does not fit either economy's sourcing coefficients.

## A sector with a common measurement basis

WTO's 2024 release of sectoral value-chain profiles reports that domestic content represented 89 percent of China's textile and clothing exports in 2022. It reports foreign content of 64 percent for Vietnam in the same sector and year, implying domestic content of 36 percent. The profiles use WTO calculations from the Asian Development Bank's June 2023 multi-regional input-output tables and the stated industry classification. [WTO, manufacturing-sector value-chain profiles](https://www.wto.org/english/news_e/news24_e/miwi_25nov24_e.htm).

| Textiles and clothing export content, 2022 | China | Vietnam |
| --- | ---: | ---: |
| Domestic value-added share | 89% | 36% |
| Foreign value-added share | 11% | 64% |

The complementary shares are calculated from the reported domestic or foreign shares. They concern a specific sector in a specific model vintage. They are not estimates of every manufacturing export or of the current sourcing of a particular textile firm. The 53 percentage-point difference describes the origin of value embodied in the export basket, rather than a difference in the physical quality of finished garments.

This evidence supports an interpretation of different production positions within the selected chain. A larger share of value embodied in China's sectoral exports originated within the domestic economy under this framework. The figure does not establish that every Chinese supplier is technologically more capable or that Vietnam would benefit from replacing every imported input. Those are different empirical and policy questions.

## Why an economy-wide number cannot replace the sector

Export content differs across industries because technologies, resources and production arrangements differ. A country specializing in final assembly may import a substantial portion of intermediate value. Another may export more products whose raw materials or upstream processing originate locally. An aggregate comparison combines these differences with the weights of industries in the export basket.

For China, the OECD's 2025 TiVA country note reports foreign content of 17 percent in all gross exports in 2022, while reporting 28.8 percent for ICT and electronics. These observations use the OECD framework and should not be combined arithmetically with the WTO-ADB textile estimates. They provide a separate illustration of within-country sector variation. [OECD, China TiVA country note](https://www.oecd.org/content/dam/oecd/en/publications/reports/2026/06/trade-in-value-added-country-notes_b71e7fb9/china_50fba151/267926aa-en.pdf).

The sector choice therefore belongs in the research question. A textile producer assessing local fabric and finishing suppliers needs a different comparison from an electronics assembler assessing components and testing services. The national average can provide context while concealing the network relevant to a specific production decision.

Price changes can alter these shares as well. If imported materials become more expensive relative to domestic assembly services, foreign value's share can rise with an unchanged physical input mix. A structural interpretation should examine appropriate price and volume evidence before attributing the entire movement to weaker domestic linkages.

## A two-stage supplier account

Consider two hypothetical manufacturing systems, A and B. Each exports final products worth two hundred. In both cases, the exporter buys directly imported intermediates and inputs from one resident supplier. Assume the resident supplier uses only the listed imported inputs and its own value added. There are no taxes, distribution margins, inventories or further border crossings.

| Component of export value | System A | System B |
| --- | ---: | ---: |
| Direct imports bought by exporter | 20 | 100 |
| Resident supplier's invoice | 100 | 40 |
| Exporter's own value added | 80 | 60 |
| Imports embedded in resident supplier's invoice | 20 | 20 |
| Resident supplier's value added | 80 | 20 |
| Total domestic value added | 160 | 80 |
| Total foreign value added | 40 | 120 |

The three initial components in each column sum to the same export value. The two supplier-detail rows decompose the invoice rather than add another layer of final output. Domestic value added is the exporter's own contribution plus the supplier's contribution. Foreign value is direct imports plus imports embodied in the resident purchase.

A local-purchase ratio would identify a meaningful difference between the systems: the resident invoice represents fifty percent of exports in A and twenty percent in B. Domestic value-added shares are eighty and forty percent, respectively. Neither share can be obtained by adding the invoice again to the final export. That would count value already embodied in the product twice.

The exercise also shows that a local invoice can change without an equivalent capability change. If an exporter replaces direct imports with purchases from a resident distributor who resells those same imports, local procurement rises but the underlying foreign production remains. The distributor may add a genuine domestic service margin. That margin, rather than the full invoice, is the additional domestic contribution attributable to the distribution activity.

## Ownership is a separate classification

The World Bank's Vietnam 2045 trade study reports that foreign firms accounted for 73 percent of exports in its assessment of Vietnam's production model. The same publication distinguishes links to global value chains from broader claims about domestic integration and describes a firm-linkage measure that includes ownership, licensed technology, exports or imports. That measure is not a percentage of local inputs. [World Bank, Vietnam 2045: Trading Up in a Changing World](https://www.worldbank.org/en/country/vietnam/publication/viet-nam-2045-trading-up-in-a-changing-world).

An ownership-based export share can establish which enterprises conduct sales abroad under the source's classification. It does not identify the origin of the value they embody. A foreign-owned resident supplier can create domestic value, while a domestically owned company can rely on imported materials. The comparison requires both classifications rather than treating one as a proxy for the other.

The distribution of resulting income adds another boundary. Domestic production can generate wages for residents and operating income for nonresident owners. A domestic-content share does not determine the amount ultimately retained by resident households. The supplier account should therefore remain distinct from the income-distribution account.

For Vietnam, the analytical concern is consequently the connection between the export-oriented and other resident production units. For China, a high domestic-content share in a selected sector still leaves questions about productivity, distribution and the contribution of specialized imported inputs. The same framework applies to both, while the relevant industrial starting points differ.

## Supplier depth includes reliability and scope

A domestic value-added share identifies origins, not the number or substitutability of suppliers. A network can contain a single large upstream producer or many competing firms while recording a similar content share. The consequences for prices, innovation and operational resilience can differ substantially.

Supplier depth should therefore be examined through the range of inputs available, the ability to meet specifications, delivery reliability and the time needed to qualify alternatives. These characteristics determine whether a local firm can participate in more demanding stages of production. A purchasing transaction alone does not establish them.

Services deserve attention within that network. Testing, maintenance, design, logistics and management support can contribute domestic value without changing the physical component list. An assessment limited to material sourcing can miss a substantial part of the economic relationship. It should identify resident production of those services and any imported content they use.

Distance also differs from economic origin. A nearby supplier can import most of an input's value; a more distant domestic producer can create substantial local content. Proximity can matter for delivery and coordination, while value-added origin matters for production income. They should be reported as distinct dimensions of the network.

## Capability development needs evidence over time

A new supplier contract can create demand without establishing a lasting improvement in capability. The firm may simply expand an existing low-complexity operation. Alternatively, meeting the contract can require new equipment, certification, training or process control that supports sales to other customers. Distinguishing those outcomes requires observations beyond the first invoice.

An evaluation should identify the specific capability and a measurable outcome. Examples include improved defect rates, shorter delivery times or qualification for a more demanding product. The outcome should be compared with a credible account of what would otherwise have occurred, especially when public support or a multinational supplier program is being evaluated.

Survival and selection matter. Exporters may choose domestic suppliers that were already more productive, rather than make them productive through the relationship. A comparison of connected and unconnected firms must consider that selection before attributing the entire productivity difference to integration. The existence of a supplier link is evidence of a relationship, not a causal estimate of a spillover.

The operating horizon matters as well. A supplier can meet an order during favorable demand conditions yet be unable to sustain quality or cash flow through a downturn. Repeated transactions, customer diversification and the financial terms of procurement add information about durability. A one-year export boom cannot establish all of those features.

## Working capital can limit a supplier relationship

Meeting a technical specification is not sufficient if a supplier cannot finance materials during the buyer's payment period. A contract can require production and delivery before cash is received. Comparing suppliers should therefore examine credit terms, receivables and the timing of input payments alongside cost and quality. Financing that constraint may enable a genuine production link, but the additional lending is not itself domestic value added. Its effect must be traced to the activity it supports.

## The policy tradeoff is more specific than import replacement

Higher domestic content can enlarge local production income when additional resident activity is competitive and valuable. Replacing an imported input with a higher-cost or lower-quality domestic substitute can also raise the exporter's costs and reduce its market opportunities. The relevant comparison is the complete economic effect, rather than the content percentage alone.

Supplier development can address coordination, information, skills or financing constraints without assuming that every input should be produced locally. Its assessment should identify the constraint, the cost of intervention and the resulting capability. A purchase mandate and a productivity improvement are different mechanisms and need different evidence.

For business, the practical question is which production stages can be supplied reliably at the required cost and specification. For public policy, the question extends to the domestic income and capabilities created relative to alternative uses of resources. The textile evidence provides context for those decisions while leaving their counterfactual effects unresolved.

## What the comparison establishes

The matched textile data reveal a large difference between China and Vietnam in the domestic origins of export value within the stated 2022 framework. The broader Chinese sector evidence and Vietnam's ownership-related evidence illustrate why that finding cannot be generalized to every firm, industry or income recipient.

The supplier account demonstrates what export growth alone leaves unresolved: direct and indirect imported content, the contribution of resident suppliers and the distinction between a local invoice and locally created value. Capability and resilience require further operating evidence, rather than an unsupported interpretation of the accounting share.

A serious comparison of export manufacturing therefore connects gross shipments to production origins, supplier performance and income distribution. It can recognize the value of imported inputs while examining opportunities for resident firms to perform more demanding work. That approach makes domestic supplier depth an economic question with observable components, rather than a label attached to export growth.

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American Economic Senate