Courtesy of The Financial Times, a close look at Vietnam:

Until 2008 Vietnam was regarded as “the next China”. Then the global credit bubble burst and a far-less impressive economy emerged.

But after returning from 10-days of field research looking at factories and infrastructure in Guangdong and Wuhan, in China, and the same in northern in Vietnam, it seems clear that Vietnam still offers a potentially cheaper alternative for China’s low-cost manufacturing.

However, there’s a caveat: it’s more useful to compare Vietnam to a Chinese province, rather than China itself.

By this measure, Vietnam would rank as one of China’s largest in terms of population, not much smaller than wealthy southern Guangdong. However, its GDP per capita is lower than even China’s poorest province, western Guizhou (relative 2011 figures of $1,224 and $2,541, respectively).

That makes it both populous and cheap in terms of labour costs. Indeed, the average salary for a Vietnamese worker in a textile factory – the kind of labour intensive industry that is now being squeezed out of Chin – is less than half that in Guangdong.

Moreover, inland Chinese cities are not much cheaper.  In the third-tier city of Xiaogan, near Wuhan, for example, rate are modestly lower, while additional benefits that workers now demand can be substantial.

And let’s remember that moving to inland China from Guangzhou is geographically farther away than moving to the north of Vietnam: Guangzhou to Wuhan is 1,019 kilometres, while Guangzhou to Hanoi is just 796!

For all that, so long as Vietnam is comparable in size to a single Chinese province, it will never by a perfect substitute. Take the apparel and footwear sector as an example. China’s exports were worth $164 billion in 2010, compared to just $14 billion in Vietnam.

China also benefits from the state planners in Beijing imposing their vision on the country and (at least attempting) to impose an orderly development path. Vietnam’s planners, by contrast, have achieved far less due to a lack of resources and poor co-ordination.

Indeed, Vietnam reportedly has an incredible 200 deep water ports when it only really needs three! (Not even Guangdong province’s competing municipal authorities have attempted the same). Perhaps fortunately, the vast majority of these facilities are “ports” in name only due to a lack of funds.

Nonetheless, Vietnam is slowly sorting its infrastructure out in places. In Hun Yen, 60 kilometres from Hanoi, there is already an efficient cluster of textile companies, albeit still importing their materials from China. And Dinh Vu port in Haiphong a further 40 kilometres away is a well-run facility with operating capacity of around 30m tonnes and easy access to the international shipping lanes leading to the US. It is currently operating at around 75 per cent of that total, so can cope with a significant increase in demand if needed.

Even better, down the road in Lach Huyen is a huge construction site that will house a deep water port able to handle 60m tonnes by 2016. And although the four-lane Hanoi-Haiphong Highway 5A can be easily log-jammed, the parallel 8-lane Highway 5B is under construction.

In short, Vietnam is not the “next China”. But its north offers a convenient niche for labour-intensive Chinese industries that need to relocate.