November 02, 2013
While Chinese traders have massively purchased farm product in the local market, Chinese companies are doing their best to entice Vietnamese businesses into importing Chinese goods. They are also deepening their presence here through strengthened partnership with or acquisition of local enterprises. That Vietnam is becoming a manufacturing base of her northern neighbor may be imminent.
Since early this year, many enterprises in the jewelry industry in HCMC have regulatory received invitations to visit factories in China as well as incentives for Chinese jewelry. “Incentives such as delayed payment schedules and cheap prices-pledges to provide all best-selling designs for the Vietnamese market-have been offered,” said Nguyen Van Dung, chairman of the city’s Fine Arts and Jewelry Association.
Although official statistics on the gold jewelry volume imported from China every month are not yet available now, it is certain that the import volume is rising and will cause difficulties to the domestic jewelry industry, Dung said. “Aside from fierce competition with Chinese rivals, quite a few local gold and jewelry trading companies in the city are struggling as they lack materials and production capital. A lot of them have had to import Chinese products for sale on the domestic market to survive the tough times.”
Some fashioning enterprises in HCMC claimed that they have received investment proposals from Chinese entrepreneurs for sale in the home market. In accordance with the proposal, Chinese partners will be responsible for capital and materials for local production.
Chinese products have flooded the local market for years. Yet the new tactic of Chinese companies has just sprung up since this year’s beginning. They have begun to approach the Vietnamese market via official channels such as investment and business cooperation and expansion. The jewelry trading sector is an exemplar.
Another sector in the local agriculture industry is facing a sad demise as a result of the failure to cope with Chinese rivals. Local firms have invested heavily in medicinal herb farming. Their business is nonetheless moribund when confronted with Chinese imports.
Nguyen Van Minh, vice chairman of the HCMC Farm and Agribusiness Association, said his member companies are encountering a lot of difficulties when making investments in the pharmaceutical material industry. A medicinal herb farming project may end in failure, Minh said, because of fierce competition from ubiquitous Chinese products which undersell them. While Chinese businesses are holding up to 90% of the medicinal herb supply in Vietnam, they are also trying to compete with local suppliers in purchasing local pharmaceutical materials.
A recent survey conducted by the HCMC Farm and Agribusiness Association indicates that 50% of medicinal herb farming area in northern Vietnam such as the northwestern and northeastern provinces is developed by Chinese firms, in both official and unofficial ways. “They invest in material zones while purchasing materials in the name of local enterprises in other schemes. They not only outsell us in terms of prices but also use mudslinging methods to discredit local competitors,” Minh stressed.
The same problem also exists in medicinal herb farming in southern provinces such as Dong Nai and Binh Phuoc. Furthermore, may other agricultural production industries are also in the same boat. Therefore, it would be difficult to encourage companies to continue investment in agriculture if the relevant authorities fail to tackle appropriately this problem.
In the textile-garment industry, Chinese enterprises have also shifted to committing investment in Vietnam to capitalize on the Trans-Pacific Partnership (TPP) of which Vietnam will be a member in the near future. With the TPP entry, textiles and garments made in Vietnam may be exempt from tariffs when exported to other TPP members.
That Chinese businesses change their investment trend is “inevitable”. To minimize the adverse impacts on local enterprises, aside from local companies’ efforts, State agencies should come up with reasonable macroeconomic policies so that Vietnam should not become a manufacturing base of China. Being more selective about technologies from China is advisable because Vietnam is suffering a trade deficit with the neighboring country.
(By Son Nghia)