Cheap Trade

It's tempting to view Vietnam as a mini-China. Both are populous Asian countries whose single-party governments are engineering a headlong rush into free-market capitalism (of a fashion). But Vietnam doesn't regard China, with whom it shares a border and a long, complicated history, as an older brother to emulate. Rather, it sees it as a regional bully, a harsh competitor, and—surprise!—a source of cheap, junky merchandise. Duncan Hunter, the obscure congressman whose presidential campaign seems based largely on hostility to illegal immigrants and China, could be very popular here. For in Vietnam, from school kids to government officials, China-bashing is very much in vogue.

One of the prerequisites of a true consumer economy is snob appeal, the ability and willingness of shoppers to draw invidious distinctions between classes of products and brands. Vietnam is clearly well on its way. Everywhere I went I encountered high-level slagging of all things Chinese-made. At a Nike factory outside Ho Chi Minh City, managers complained about counterfeit shoes flooding in from China. In urban areas Chinese goods are distinctly low-status. Le Dang Doanh, an economist and former president of the Central Institute for Economic Management, spoke about imported Chinese-made clothes the way a bespoke-suit-wearing Wall Street banker might talk about Wal-Mart overalls. Chinese-made clothes, he said, are for the "buffalo boys"—country kids seen riding water buffaloes to work in the fields. And for those in the know, status matters. Our fixer and guide, Ha Tran, described her mortification when, upon returning from the United States with clothes bought from Old Navy as presents, she discovered that they were made not in America but in Vietnam.

For American visitors, who tend to view Vietnamese history through the lens of our disastrous 20-year involvement, it's surprising how little the war defines collective memory and attitudes toward Americans and American goods. It could be that our hosts were simply being polite. Or it could be a function of the extreme youth of Vietnam. About 40 percent of the population was born after the fall of Saigon. There are memorials and monuments, to be sure, but they're unobtrusive, like the small cement statue in Hanoi that marks the spot where John McCain was shot down in Truch Buch Lake in 1967. At the War Remnants Museum in Ho Chi Minh City, where the propagandistic exhibits include a chilling photograph of two American soldiers water-boarding a prisoner, the crowd was roughly divided between tourists and Vietnamese school kids gleefully posing on captured American tanks. Yet the Vietnamese politicians, businesspeople, and kids we met seemed to regard the United States as one in a list of imperial powers the country had fended off in its long quest for independence. No hard feelings. The regime has decided that it is moving forward economically, that it needs capital and investment, and that it would much rather throw in its lot with the United States, Japan, and Europe than with China.

In our travels we heard repeated stories of how Vietnamese brands and consumers had fought off cheap Chinese imports by improving quality and focusing on brands. In urban clothing stores consumers are far more likely to find domestically made clothes than Chinese ones. "Now the time for cheap products has gone by," said Nguyen Thi Thanh Hu, general director of apparel maker Garco 10, which derives about 20 percent of its sales from the Vietnamese consumer market. Last summer a Vietnamese company, Viet Tien, signed a deal with Perry Ellis to license its Manhattan line of clothes for the domestic market.

In the 1990s, said a senior trade official, cheap Chinese beer flooded the market. "Ten years ago eight of every 10 bottles of beer in the market were Chinese-made, and everybody was afraid," he said. But Vietnamese brands like 333, Saigon and Tiger Beer (foreign-owned but brewed domestically) took marketing cues from Western beer companies and began advertising on television. As they did so, better-off consumers grew more sophisticated. "In the past we just drank any beer we had," said the trade official. But today "there is no Chinese [brand] in the market to compare."

The arrival of cheap Chinese motorbikes a few years ago forced Japanese firms to cut prices significantly. But Vietnamese consumers with disposable income now look beyond price. The trade official said he had bought a Chinese-made motorbike for his daughter, but she sold it after a year and purchased a Japanese-made one instead. At Le Quy Don High School, a magnet public school in Ho Chi Minh City, we chatted with students (most disconcerting flat-Earth moment: the unanimous roar of approval that arose when we asked if they liked Hannah Montana). "The goods imported to Vietnam from China are not really good," Bang Thanh, a 16-year-old wearing stylish sunglasses, told me. "The Honda motorbikes they make there and bring in are no good."