Vietnam is a communist single-party state that lies between America and China in many supply chains. The two countries are its two biggest trading partners. It has the fifth-biggest trade surplus with America of any country. It spars with China over fishing and mineral rights in the South China Sea. Over the past four years Vietnam has embarked on its own land-reclamation campaign on islets it controls in the Spratly chain, creating enough new land that analysts said it was on track to surpass China in total area at some point in 2026—prompting China to begin massive dredging at Antelope Reef in the Paracels. It is a member of ASEAN and has a free-trade agreement with the European Union.
Vietnam is led by the general secretary of the Vietnamese Communist Party. To Lam, who spent eight years running the country's security services, became general secretary in August 2024 after the death of his predecessor Nguyen Phu Trong. Mr Lam has visited 13 countries since taking charge. He has abolished five ministries, eliminated an entire layer of bureaucracy at the level of Vietnam's 705 districts, and is reducing the number of provinces from 63 to 34—eliminating 100,000 civil-service jobs in all. He has decreed a 30% reduction in red tape and called for higher pay for capable civil servants.
Mr Lam's reforms partly seek to reverse the legacy of the "blazing furnace", an anti-corruption campaign initiated by Nguyen Phu Trong. Over 330,000 party members were prosecuted or punished and tens of thousands resigned, making bureaucrats drastically risk-averse. Mr Lam has sought to engender an atmosphere of tolerance of mistakes.
Unlike in China, Vietnam's politburo and even its central committee can block decisions they find intolerable. Mr Lam's reforms have been the biggest changes since the doi moi reforms of the 1980s and have broken many rice bowls: tens of thousands of bureaucrats have lost their jobs, and state-owned enterprises feel threatened by his support for private companies. He has also decreed that, for the first time, the party leader in each province must be an outsider drafted in from another part of the country. A reform that would have brought 5m household businesses into the tax system met a backlash and had to be withdrawn.
The army, which has its own disciplinary system, escaped Mr Lam's anti-corruption purges. Vietnam's generals run many businesses and are hostile to market reforms that would subject their companies to more competition. They are also suspicious of Mr Lam's apparent desire to form closer ties with Western countries and Asian democracies. The army uses its control of the party's propaganda apparatus to criticise Mr Lam's reforms obliquely. At the head of the military faction is General Phan Van Giang, the defence minister. Army-controlled social-media accounts appeared to position him as a successor to Mr Lam in late 2025.
Under Nguyen Phu Trong, Vietnam pursued "bamboo diplomacy"—bending but not breaking when bigger powers huff and puff. Vietnam has refused to condemn Russia's invasion of Ukraine but receives less opprobrium than India or South Africa. A former Australian ambassador described Vietnam as having "enormous moral capital".
To Lam was the first Asian leader to reach Donald Trump by phone after the April 2nd 2025 "reciprocal" tariff announcement, offering to eliminate all tariffs on American goods. Days later he welcomed Xi Jinping to Hanoi for his second state visit in three years, prompting Mr Trump to accuse the pair of conspiring against America. Mr Lam is seeking closer ties with the EU, Russia (for cheap nuclear plants) and South Korea (for affordable weapons), as well as with fellow members of the Trans-Pacific Partnership and ASEAN. In late March 2026 Vietnam and Russia struck a long-expected nuclear deal during a visit to Moscow by Vietnam's prime minister; Vietnam also announced it would build a nuclear power plant with Russian assistance.
EV sales doubled in Vietnam over the past year, driven in part by VinFast, a local carmaker owned by Pham Nhat Vuong. A wave of cheap Chinese-made EVs has also entered the market. Electric two- and three-wheelers are surging in popularity as well.
The Vietnamese diaspora numbers around 5m people, living and working everywhere from America to eastern Europe. Overseas Vietnamese are known as "Viet Kieu". They send back roughly $16bn in remittances a year, one of the highest hauls in Asia and greater than the diasporas of Indonesia or Thailand. Hundreds of thousands of Viet Kieu visit their homeland every year; many stay permanently.
The diaspora was created largely by the fall of Saigon in 1975, when North Vietnamese troops stormed into the capital of American-backed South Vietnam. The chaotic evacuation marked the end of the Vietnam war. The government started encouraging Viet Kieu to return in the 1990s, describing them as "an inseparable part of the Vietnamese nation". A thaw in relations with America helped Vietnam develop its export-oriented economic model.
Vietnam's economy has averaged 6% annual growth over the past 15 years, grew by 7% in 2024 and by 8% in 2025—fast but just short of the year's target of 8.3-8.5%. The 2026 target is 10%. GDP per person has increased 18-fold over the past 40 years. Tax revenues rose by 30% in 2025 alone. The economy was opened up through market reforms called doi moi ("renovation"), launched in 1986 after annual inflation reached 454% and half the population was living in poverty.
Vietnam has attracted $230bn of cumulative multinational investment. Foreign direct investment reached $19bn in 2023. Foreign enterprises accounted for a fifth of GDP that year, up from 6% in 1995. The biggest investor is Samsung, whose complex in Pho Yen near Hanoi employs some 160,000 workers assembling the bulk of Samsung's smartphones. Samsung alone accounts for 14% of Vietnam's exports. Foreign firms account for just 10% of employment and 16% of investment, but 72% of exports. Total exports have risen eight-fold since 2007, to $385bn a year.
Yet Vietnamese workers are largely assembling parts made in China or South Korea, adding less value than nearby Malaysia and Thailand. China contributed 6% of the value of Vietnamese exports serving the American market for manufactures in 2017, according to Natixis, a bank; that figure had jumped to 16% by 2022, a sharp increase since Trump's first trade war. Over 90% of manufacturing jobs require few or no skills. None of Samsung's core suppliers is a homegrown Vietnamese firm. Multinationals in Vietnam source the lowest share of local inputs of any country in East and South-East Asia.
Vietnam has reached the "Lewis turning point", at which developing economies exhaust rural labour surpluses and wages begin to rise swiftly. Labour costs in manufacturing are already higher than in India or Thailand and are set to climb by a further 48% by 2029. Vietnam risks a classic middle-income trap: too expensive for labour-intensive manufacturing yet too technologically unsophisticated for much else. The total workforce aged 15-64 will peak around 2030. Ho Chi Minh City and Hanoi, which together generate over a quarter of output, are among the most flood-prone cities in the world. The rich farmland of the Mekong Delta is shrinking by 500 hectares a year.
Mr Lam wants to lift the private sector's share of output to 70%, from around 50% today. Regulations are complex, enforcement is opaque and the state dominates banking and thus access to credit. Banks tend to insist on property or durable-goods inventory as collateral and are unwilling to lend against projected future cashflows. Vietnam has only around 5,000 chip engineers and will need 15,000 chip designers and 10,000 assembly engineers by 2030. Unlike China, Singapore or South Korea, Vietnam has no world-class universities; even engineering students must spend as much as a quarter of their time on mandatory classes in Marxism-Leninism and Ho Chi Minh thought.
Pham Nhat Vuong, Vietnam's richest man, runs Vingroup, the country's biggest developer-turned-conglomerate. Its subsidiary VinFast is South-East Asia's biggest homegrown electric-vehicle maker, selling nearly 100,000 EVs in 2024, though it has lost $9bn since 2021. Vietnam's EV charging network is compatible only with VinFast's cars. The government is considering giving another Vingroup subsidiary, VinSpeed, a $60bn contract to build a high-speed railway.
Viet Kieu returning from abroad bring skills, education and wealth. Some American-Vietnamese work for international technology companies operating in the country.
State infrastructure spending rose by 27% in 2025, to 845trn dong ($32bn, or 7% of GDP), and the budget for 2026 envisages another 34% increase—on a par with China's public-investment figures during its development heyday in the 2000s and early 2010s. Projects blessed by the party in December 2025 include a $32bn road-building effort along the northern Red River, a new motorway to Cambodia and the Dong Son Bronze Drum Stadium, a 135,000-seat sports complex developed by Vingroup at the centre of a $35bn sports-themed megaproject, slated for completion by 2035. A new international airport near Ho Chi Minh City welcomed its first flight on December 19th 2025. The infrastructure push is led by a handful of well-connected conglomerates; Vietnam's leaders are thought to see South Korea's chaebols as a model.
In October 2025 FTSE Russell upgraded Vietnam from a frontier market to an emerging one; the change, set to take effect late in 2026, could attract $1.4bn in capital from passive investors in emerging-market funds, according to Goldman Sachs. Vietnam's benchmark stock index rose by 37% in dollar terms in 2025, putting it far ahead of rivals. But three "Vin" stocks—Vingroup, Vinhomes and Vincom Retail—accounted for almost three-quarters of the gains; without them the index would have risen by just 11%.
On July 2nd 2025 Donald Trump announced a trade deal with Vietnam, his second after an agreement with Britain in May. Vietnam agreed to open up to American SUVs and to accept higher tariffs on Chinese packages transiting the country en route to America. In return, it now faces tariffs of 20% on most goods, down from the 46% threatened in April. The deal also imposes 40% tariffs on "any transshipping". Peter Navarro, one of Trump's trade advisers, has claimed that "China uses Vietnam to transship to evade the tariffs...They slap a made-in-Vietnam label on it and they send it here", and that this "China wash" accounts for a third of Vietnam's exports to America. Caroline Freund of the University of California, San Diego, estimates the share peaked at less than 8% in 2020 and has since fallen.
Vietnam has long dreamt of replacing the creaking Transindochinois railway, installed by the French a century ago, with a high-speed line. In 2009 a proposal for a high-speed railway was approved by the politburo and central committee but blocked by the National Assembly in a rare show of discord—the project would have cost more than half of the country's annual GDP at the time.
A revived plan envisages a 1,540km railway from Ho Chi Minh City to Hanoi that would cut the journey to six hours, down from 35. The updated price tag is $70bn, about 14% of current GDP—the largest infrastructure project in Vietnam's history and among the costliest rail schemes in the world. Authorities say construction will begin before the end of 2026, but funding remains unresolved. Vingroup offered to bear 20% of the cost but withdrew its bid in December 2025 after the government refused its request for an interest-free loan covering the remainder. No other eligible bidder has emerged. Some analysts argue it would be wiser to start with the most profitable leg, from Ho Chi Minh City to the coastal city of Nha Trang.
April 30th is "Reunification Day", marking the end of the Vietnam war. The 50th anniversary was celebrated in 2025 with fireworks, fighter jets and military parades in Ho Chi Minh City (formerly Saigon). The anniversary remains complicated for older Viet Kieu who lived through the fall of Saigon.
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