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Vietnam is cautious about China's rapid and substantial investments.

Vietnam is cautious about China’s rapid and substantial investments.

The president of the Vietnam Association for Supporting Industries cautioned that an increase in Chinese investment in Vietnamese supporting industries may lead to domestic businesses experiencing competition and potential challenges.

One week after Vietnam and China signed 36 cooperation documents during Chinese President Xi Jinping’s visit, Phan Dang Tuat made a statement about the two countries’ trade cooperation. The joint statement released on December 13 stated that Vietnam and China are committed to enhancing their collaboration in economic zones, investment, trade, and other fields.

Economic analysts predict that the agreements will create opportunities for Vietnam to draw in top-notch direct investments from China.

However, Tuat expressed concern about the increasing number of Chinese supporting-industry companies entering the Southeast Asian nation.

Industries that support manufacturing provide manufacturers with raw materials and components.

According to VN Express International, a Vietnamese newspaper, Tuat expressed his worries during the Ministry of Industry and Trade’s year-end conference on December 20. He raised concerns about the swift and significant influx of Chinese companies into the market.

According to Tuat, companies in the Chinese supporting industry are rapidly establishing extensive production networks in Vietnam in order to export components and parts to Europe and North America.

According to VN Express International, Tuat stated that this is a major issue for domestic businesses in the supporting industry.

The trade dispute between China and the United States.

According to reports from Reuters, ever since former President Donald Trump initiated a trade dispute with China in 2018, numerous Chinese items have been discovered to be falsely labeled as “Made in Vietnam” in order to evade the tariffs imposed by the U.S. on Chinese imports.

The ongoing trade conflict has also motivated Chinese companies to relocate their manufacturing operations to other nations, such as Vietnam, in order to avoid the imposition of tariffs by the United States.

According to the Vietnamese publication Tuoi Tre, during the ministry’s conference, Tuat mentioned that domestic companies in Vietnam are facing challenges in competing with Chinese firms due to costly capital and high manufacturing costs caused by a lack of economies of scale.

In 2023, businesses in Vietnam experienced a 40% decrease in income due to a decline in orders from key markets, including Europe, as reported by Tuat.

The speaker also mentioned that the lending rates in Vietnam are abnormally high, causing damage to the country’s supporting industry businesses. These businesses consist of around 1,500 companies. Reports from Tuoi Tre state that while Vietnamese companies are obligated to borrow from local banks at rates between 10% and 12%, foreign investors can obtain loans from overseas at much lower rates.

According to Ha Hoang Hop, an associate senior fellow at the ISEAS-Yusof Ishak Institute in Singapore, Vietnam needs to accelerate the development of its supporting industries to keep pace with Chinese rivals who have a significant advantage. This event should serve as a reminder for Vietnam to take action.

Pham Chi Lan, former general secretary of the Vietnam Chamber of Commerce and Industry, expressed concern to VOA.

She stated that we must acknowledge this reality and take note of the past situation where international investors opted for Chinese suppliers over Vietnamese ones for their manufacturing needs in Vietnam.

to solar energy

The use of semiconductors could greatly benefit solar energy.

According to Hop and Lan, the ongoing trade conflict between the United States and China has caused investors in the semiconductor industry to turn their attention towards Vietnam, which could have positive effects for the country.

Hop said that Vietnam has been added to the U.S.’s “friendshoring” network and that Vietnam should take advantage of this opportunity. “Friendshoring” refers to the strategy of concentrating supply chain networks in countries that are considered to be political and economic allies of the U.S.

According to specialists, Vietnam has a favorable location for attracting American investors who are looking to minimize risks associated with supply chain investments in China.

“The competition between the U.S. and China is getting intense when the U.S. is banning the export of some equipment and technology to China, and this is a great opportunity for Vietnam to be able to secure some deals,” said Hop, referring to the U.S. export ban on chipmaking equipment and rare-earth technologies.

Lan, who served as a consultant to former Vietnamese Prime Ministers Vo Van Kiet and Phan Van Khai, shared the same opinion as Hop.

Lan stated that the United States, Japan, and European nations desire for Vietnam to be a strong and independent country, rather than being weak and reliant on China, for their own advantages.

After a significant meeting between the United States and Vietnam in September, which strengthened their relationship, Vietnam then also established Japan as one of its comprehensive strategic partners in November, alongside China. According to experts interviewed by VOA, this move was aimed at upgrading ties with Hanoi in response to China’s increasing influence in the region and to lessen its reliance on Chinese supply chains.

The U.S. State Department announced a new collaboration with Vietnam, stating that it will allow for the exploration of potential growth and diversification in the global semiconductor industry. This partnership aims to establish a more sustainable and secure global value chain for semiconductors.

According to Lan and Hop, Vietnam is ready to venture into the field of chip design and potentially chip manufacturing, as the ongoing trade conflicts between the United States and China have opened up possibilities for the country.