One of the greatest challenges facing emerging markets like China and Vietnam is what to do about State-Owned Enterprises, or nationally owned industries.  There are 145,000 of them in China alone. They generate 35% of China’s GDP and 43% of profits. Many of them survive only with large government subsidies, which distort national markets. They may enjoy lower tax rates than privately owned competitors. They often rely on huge bank loans at preferential rates of interest, crowding out other borrowers, discouraging investment and adding to government liabilities. So what should be done?

Labour costs are only half that in China, for same job in same kind of factory.  But that only makes sense if productivity is half, which is unlikely, especially in any newly built manufacturing base.
Expect therefore that the investments will continue – although it may be a challenge to consistently top more than $10bn a year, as has been the case recently, because there are even cheaper destinations such as Myanmar that are opening up.Vietnam – time to catch up with rest of Asia.

Here is a fact beyond dispute:  China is set to become the world’s largest economy.  The only debates are by what date and by what measure? 

Post written in 2012 - turned out to be highly accurate: