Need To Know: June 10

China rushes more troops near India border

China’s state broadcaster hyped the People’s Liberation Army mobilizing of thousands of paratroopers, armoured vehicles and equipment to a place where it says they could be deployed “within hours” to China’s border with India in the Himalayas.

According to CCTV, the soldiers and armoured vehicles were transported from the central province of Hubei to an unspecified location in China’s northwest plateau — thousands of kilometres away — in “just a few hours.”

Footage of troops boarding civilian planes and trains in the “maneuver operation” was aired, the same day top generals from China and India held talks in Moldo, on the Chinese side of the Galwan Valley.

They were trying to defuse a stand-off that began in early May when border troops engaged in fist fights and stone-throwing. China then set up more than 80 tents, established defensive positions, and put reinforcements on the Indian side of the Galwan Valley. China’s best fighters and bombers have also been seen flying over the now occupied area.

Our theory — which you can find the long version of here — is Chinese President Xi Jinping is trying to use nationalism to distract his people from his mismanagement of Covid-19 and the economy. We also think grumbling in the Communist Party has started over these and other problems, which Xi — anointed by the CCP as a supreme leader equal to Mao to tackle— has failed to deal with.

Will Vietnam-E.U. trade pact spark China exodus?

Vietnam approved a free trade agreement with the European Union, a move expected to help make the country a new investment destination for manufacturers looking to leave China.

The trade deal has already been ratified by the E.U., making Vietnam the second Southeast Asian nation to have such a trade treaty with the European bloc after Singapore.

Once the agreement takes effect in August, 71% of exports from Vietnam to the E.U. will become duty-free, as will 65% of E.U. shipments to Vietnam. The remaining tariffs up to 99% will be phased out by Hanoi over 10 years and by Brussels over seven years.

With about 96 million people, Vietnam has the third-largest population among the 10-member Association of Southeast Asian Nations. Per capita GDP is estimated at nearly $3,500 for 2019, topping the $3,000 benchmark at which car and appliance ownership tends to take off.

Particularly strong growth is expected for apparel and footwear, which account for roughly 20% of Vietnam's total exports. Vietnam ranks as the world's third-largest apparel exporter after China and Bangladesh.

With its long coast line, flat land, and young and cheap population, Vietnam has long been eyed by companies looking to leave China because of the U.S.-China trade war. However, many businesses were deterred by the lack of infrastructure. Vietnam doesn’t have the electricity, roads and ports to support a mass movement of manufacturers from China in short period of time.

But in combination with India and the Philippines, it starts to give companies alternatives to China.