05-23-2019, 07:38 AM
** 21-May-2019 World View: Vietnam to gain from collapse of US-China trade talks
Thanks to China's new Foreign Investment Law and the apparently
complete collapse of the US-China trade negotiations, new investment
opportunities are opening up in China's neighbors, especially
Vietnam, but care must be taken to reduce risks.
China passed its Foreign Investment Law in March. It allows any
Chinese Communist Party (CCP) official to visit a foreign-owned
business and demand copies of all confidential company business
records and company data, as well as its source code and all other
intellectual property. Compliance is required.
US and Chinese trade negotiators had reached a 150-page written
agreement that removed all of these regulations.
US trade negotiators had thought that they had an agreement with the
Chinese negotiators that threw out all these onerous conditions. But
late in the evening, Friday May 3, Washington received the latest
edits from their Chinese counterparts that completely reneged on all
of Beijing's commitments. It's now believed that Beijing never had
any intention of honoring the its commitments, but expected that
political pressure would force President Donald Trump to accept the
watered-down agreement anyway. Instead, Trump angrily announced a new
rounds of tariffs and restrictions on Huawei. It's believed to be
quite a shock to Beijing that Trump is receiving wide support from the
international community and Democrats in Washington to stand up to
China, at least for the time being. China will not back down from its
trade model that uses subterfuge, extortion, and ignoring its
commitments and obligations, and Trump cannot back down because to do
so would be appeasement, and would do no good anyway.
And so the US-China trade negotiations have apparently completely
collapsed. China and the US have entered a period of tit-for-tat
escalations of trade restrictions, including higher tariffs and
blocking certain types of sales and business transactions.
**** Businesses shifting production to Vietnam
The collapse of the US-China trade talks is shaking up all of Asia,
and there are certainly going to be winners and losers. Vietnam is
hoping to be one of the major winners, as businesses look for
countries to which to shift their manufacturing out of China, in order
to avoid the US tariffs.
Vietnam also has a young, ambitious labor force, with two-thirds of
the population under age 35. Just as the West had its "baby boom"
after World War II, Vietnam had its own baby boom after the extremely
bloody civil war between North and South Vietnam in the 1970s,
and those babies are now of working age.
Furthermore, labor costs are a fraction of what they are in
neighboring countries. According to one estimate, labor costs in
Vietnam are half those of China, with the same worker productivity.
Because of the US-China trade dispute, many companies are considering
moving their manufacturing facilities from China to Vietnam, since
exports from Vietnam would not be subject to the US tariffs.
Vietnam was flat on its back after the 1970s wars, but the economy has
changed substantially in the last decade or so. For example, fifteen
years ago Vietnam imported almost all the food it consumed, but today
Vietnam is in the top two exporters of rice and coffee and exports a
lot of seafood worldwide, mainly to China and Hong Kong.
*** North vs South Vietnam
Those wanting to make more direct investments in Vietnam should
distinguish between the the North and the South, because they have
two very different cultures, and in many ways they're like
two different countries.
North Vietnam (Vietnamese Kingdom) was originally populated by ethnic
Chinese, while South Vietnam (Champa Kingdom) was populated by
Polynesian settlers from Indonesia and Malaysia. These ethnic
differences resulted in one crisis war after another over the
centuries.
The country was united by the Tay-Son rebellion (1771-1790), the most
celebrated military event in Vietnamese history, ending in a brilliant
battle in 1789 where the Vietnamese troops repelled a much larger
Chinese army. The North and South remained technically united through
the French colonial period, until Ho Chi Minh founded the Vietnam
Communist Party and drove the French out of North Vietnam in 1956.
The North and the South went through bloody civil war (America's
"Vietnam war") that united the two regions under the North Vietnamese
communists. However, although the war has ended, there's still a
great deal of animosity between the North and the South. Furthermore,
after the war ended, Vietnam followed up with wars against Cambodia,
and then a border war with China.
After the 1970s wars, the Communist government in Hanoi applied
Communist restrictions on businesses in the South, with the continued
use of wartime planning mechanisms that emphasized output targets and
paid little heed to production.
In 1986, Hanoi adopted the Doi Moi economic reforms, with a
significant effect on the south, making it the engine for Vietnam’s
industrial growth.
*** Moving to North Vietnam after the US-China negotiations
Companies moving their production facilities from China to Vietnam to
evade US tariffs are selecting sites for convenience, in North Vietnam
close to China's border. The Hanoi government is encouraging
investments from China, but North Vietnamese public in general is
opposed. Critics argue that Chinese projects exploit cheap labor and
minerals, while polluting the environment and landing the locals in
debt.
Vietnamese hostility toward China is great for a number of reasons.
In the late 1970s, after the Vietnam civil war, there was an extremely
bloody border war between China and Vietnam that left a lot of dead
but was otherwise inconclusive. More important, China has illegally
annexed the South China Sea, including regions that historically
belonged to Vietnam. China's navy has even attacked Vietnamese
fishing boats in Vietnam's own territorial waters.
In 2014, thousands of anti-Chinese protesters in Vietnam, furious over
China's installation of an oil rig in waters in the South China Sea
historically claimed by Vietnam, turned violent and torched a number
of factories in a southern Vietnam industrial park. It was Chinese
factories that were the nominal targets, but the angry mob also
attacked properties owned by Korea, Singapore, Taiwan and Japan.
Public opposition last year to Chinese investments became focused when
thousands of people filled the streets of several major cities across
Vietnam in June, 2018. They were protesting a proposal to create
three "economic zones" which would give special business and trade
privileges to foreign investors. They were particularly objecting to
a proposal to allow 99 year leases by foreign investors, which allow
the Chinese to set up Chinese enclaves that would remain forever. The
Vietnamese public strongly opposed the economic zones. So far, public
pressure has prevented the Communist government in Hanoi from gaining
approval of the economic zones.
*** Investing in South Vietnam -- Ho Chi Minh City (HCMC or Saigon)
Those who wish to invest in South Vietnam should focus on the city of
Saigon, which was renamed to Ho Chi Minh City or HCMC by the
Communists after the 1970s civil war. Last year HCMC attracted
foreign investment of over $7 billion, 22% of the country’s total.
HCMC is experiencing a major real estate boom, thanks to low property
prices. However, the disproportionate investment in real estate is
raising concerns. Foreign investment money is pouring into Saigon for
real estate, but not so much for industries.
During the first four months of 2019, real estate accounted
for 46.8% of foreign investment, with little going for
industries such as manufacturing or agricultural processing.
In response, the HCMC People's Committee chairman Le Thanh Liem has
called for $53.8 billion in foreign invesments, focusing on nine areas,
including transport, infrastructure, agriculture, commerce-service,
education, and healthcare. 1,000 hectares of land would be earmarked
for industrial purposes to attract investors.
--- Sources:
-- Vietnam's Booming Economy Offers Investment Opportunities
http://www.morningstar.co.uk/uk/news/181...ities.aspx
(Morningstar, 22-Feb-2019)
-- Industries in Vietnam
http://factsanddetails.com/southeast-asi...-3477.html
(Facts and Details, 2014)
-- Top 4 ETFs for Investing in Vietnam
https://www.investopedia.com/articles/et...tnam-etfs/
(Investopedia, 29-Apr-2019)
-- How Will Foreign Investment Change Vietnam’s Economy?
https://www.voanews.com/a/how-will-forei...46702.html
(VOA, 25-Mar-2019)
-- New China Foreign Investment Law: Not Good News
https://www.chinalawblog.com/2019/04/new...-news.html
(China Law, 23-Apr-2019)
-- Saigon / HCMC / Chinese Get Chances to Invest in Vietnam Despite
Political Rifts
https://www.voanews.com/a/vietnam-and-ch...03661.html
(VOA, 17-Dec-2018)
-- Saigon /HCMC / Vietnam, with its low property prices, has become a
new treasure hunting ground for Hong Kong and China buyers
https://www.scmp.com/property/hong-kong-...w-treasure
(South China Morning Post, Hong Kong, 23-May-2019)
-- Saigon / HCMC / Big real estate developments and infrastructure
plans make Ho Chi Minh City Vietnam’s most lively city
https://www.webuildvalue.com/en/reportag...aigon.html
(We Build Value, 13-Feb-2019)
-- Growth quality concerns over disproportionate investment in Saigon
real estate
https://e.vnexpress.net/news/business/in...21792.html
(Vietnam Express, 13-May-2019)
-- HCMC wants $54 billion foreign investment
https://e.vnexpress.net/news/business/ec...20629.html
(Vietnam Express, 8-May-2019)
-- Saigon / HCMC / The Hot New Market for Luxury Property Is Vietnam
https://www.bloomberg.com/news/articles/...ty-markets
(Bloomberg, 18-Feb-2019)
-- How can Vietnam avoid becoming China’s dirty industrial backyard?
https://www.scmp.com/week-asia/economics...l-backyard
(South China Morning Post, Hong Kong, 9-May-2019)
-- The spoils of trade war: Asia’s winners and losers in US-China
clash
https://www.scmp.com/week-asia/geopoliti...hina-clash
(South China Morning Post, Hong Kong, 28-May-2019)
-- FAQs About The Special Economic Zones and Vietnam’s SEZ Draft Bill
https://www.thevietnamese.org/2018/08/fa...raft-bill/
(The Vietnamese, 28-Aug-2018)
-- Public criticism pressures Vietnam to back down on new economic
zones
https://www.chinadialogue.net/article/sh...omic-zones
(China Dialog, 26-Mar-2019)
Thanks to China's new Foreign Investment Law and the apparently
complete collapse of the US-China trade negotiations, new investment
opportunities are opening up in China's neighbors, especially
Vietnam, but care must be taken to reduce risks.
China passed its Foreign Investment Law in March. It allows any
Chinese Communist Party (CCP) official to visit a foreign-owned
business and demand copies of all confidential company business
records and company data, as well as its source code and all other
intellectual property. Compliance is required.
US and Chinese trade negotiators had reached a 150-page written
agreement that removed all of these regulations.
US trade negotiators had thought that they had an agreement with the
Chinese negotiators that threw out all these onerous conditions. But
late in the evening, Friday May 3, Washington received the latest
edits from their Chinese counterparts that completely reneged on all
of Beijing's commitments. It's now believed that Beijing never had
any intention of honoring the its commitments, but expected that
political pressure would force President Donald Trump to accept the
watered-down agreement anyway. Instead, Trump angrily announced a new
rounds of tariffs and restrictions on Huawei. It's believed to be
quite a shock to Beijing that Trump is receiving wide support from the
international community and Democrats in Washington to stand up to
China, at least for the time being. China will not back down from its
trade model that uses subterfuge, extortion, and ignoring its
commitments and obligations, and Trump cannot back down because to do
so would be appeasement, and would do no good anyway.
And so the US-China trade negotiations have apparently completely
collapsed. China and the US have entered a period of tit-for-tat
escalations of trade restrictions, including higher tariffs and
blocking certain types of sales and business transactions.
**** Businesses shifting production to Vietnam
The collapse of the US-China trade talks is shaking up all of Asia,
and there are certainly going to be winners and losers. Vietnam is
hoping to be one of the major winners, as businesses look for
countries to which to shift their manufacturing out of China, in order
to avoid the US tariffs.
Vietnam also has a young, ambitious labor force, with two-thirds of
the population under age 35. Just as the West had its "baby boom"
after World War II, Vietnam had its own baby boom after the extremely
bloody civil war between North and South Vietnam in the 1970s,
and those babies are now of working age.
Furthermore, labor costs are a fraction of what they are in
neighboring countries. According to one estimate, labor costs in
Vietnam are half those of China, with the same worker productivity.
Because of the US-China trade dispute, many companies are considering
moving their manufacturing facilities from China to Vietnam, since
exports from Vietnam would not be subject to the US tariffs.
Vietnam was flat on its back after the 1970s wars, but the economy has
changed substantially in the last decade or so. For example, fifteen
years ago Vietnam imported almost all the food it consumed, but today
Vietnam is in the top two exporters of rice and coffee and exports a
lot of seafood worldwide, mainly to China and Hong Kong.
*** North vs South Vietnam
Those wanting to make more direct investments in Vietnam should
distinguish between the the North and the South, because they have
two very different cultures, and in many ways they're like
two different countries.
North Vietnam (Vietnamese Kingdom) was originally populated by ethnic
Chinese, while South Vietnam (Champa Kingdom) was populated by
Polynesian settlers from Indonesia and Malaysia. These ethnic
differences resulted in one crisis war after another over the
centuries.
The country was united by the Tay-Son rebellion (1771-1790), the most
celebrated military event in Vietnamese history, ending in a brilliant
battle in 1789 where the Vietnamese troops repelled a much larger
Chinese army. The North and South remained technically united through
the French colonial period, until Ho Chi Minh founded the Vietnam
Communist Party and drove the French out of North Vietnam in 1956.
The North and the South went through bloody civil war (America's
"Vietnam war") that united the two regions under the North Vietnamese
communists. However, although the war has ended, there's still a
great deal of animosity between the North and the South. Furthermore,
after the war ended, Vietnam followed up with wars against Cambodia,
and then a border war with China.
After the 1970s wars, the Communist government in Hanoi applied
Communist restrictions on businesses in the South, with the continued
use of wartime planning mechanisms that emphasized output targets and
paid little heed to production.
In 1986, Hanoi adopted the Doi Moi economic reforms, with a
significant effect on the south, making it the engine for Vietnam’s
industrial growth.
*** Moving to North Vietnam after the US-China negotiations
Companies moving their production facilities from China to Vietnam to
evade US tariffs are selecting sites for convenience, in North Vietnam
close to China's border. The Hanoi government is encouraging
investments from China, but North Vietnamese public in general is
opposed. Critics argue that Chinese projects exploit cheap labor and
minerals, while polluting the environment and landing the locals in
debt.
Vietnamese hostility toward China is great for a number of reasons.
In the late 1970s, after the Vietnam civil war, there was an extremely
bloody border war between China and Vietnam that left a lot of dead
but was otherwise inconclusive. More important, China has illegally
annexed the South China Sea, including regions that historically
belonged to Vietnam. China's navy has even attacked Vietnamese
fishing boats in Vietnam's own territorial waters.
In 2014, thousands of anti-Chinese protesters in Vietnam, furious over
China's installation of an oil rig in waters in the South China Sea
historically claimed by Vietnam, turned violent and torched a number
of factories in a southern Vietnam industrial park. It was Chinese
factories that were the nominal targets, but the angry mob also
attacked properties owned by Korea, Singapore, Taiwan and Japan.
Public opposition last year to Chinese investments became focused when
thousands of people filled the streets of several major cities across
Vietnam in June, 2018. They were protesting a proposal to create
three "economic zones" which would give special business and trade
privileges to foreign investors. They were particularly objecting to
a proposal to allow 99 year leases by foreign investors, which allow
the Chinese to set up Chinese enclaves that would remain forever. The
Vietnamese public strongly opposed the economic zones. So far, public
pressure has prevented the Communist government in Hanoi from gaining
approval of the economic zones.
*** Investing in South Vietnam -- Ho Chi Minh City (HCMC or Saigon)
Those who wish to invest in South Vietnam should focus on the city of
Saigon, which was renamed to Ho Chi Minh City or HCMC by the
Communists after the 1970s civil war. Last year HCMC attracted
foreign investment of over $7 billion, 22% of the country’s total.
HCMC is experiencing a major real estate boom, thanks to low property
prices. However, the disproportionate investment in real estate is
raising concerns. Foreign investment money is pouring into Saigon for
real estate, but not so much for industries.
During the first four months of 2019, real estate accounted
for 46.8% of foreign investment, with little going for
industries such as manufacturing or agricultural processing.
In response, the HCMC People's Committee chairman Le Thanh Liem has
called for $53.8 billion in foreign invesments, focusing on nine areas,
including transport, infrastructure, agriculture, commerce-service,
education, and healthcare. 1,000 hectares of land would be earmarked
for industrial purposes to attract investors.
--- Sources:
-- Vietnam's Booming Economy Offers Investment Opportunities
http://www.morningstar.co.uk/uk/news/181...ities.aspx
(Morningstar, 22-Feb-2019)
-- Industries in Vietnam
http://factsanddetails.com/southeast-asi...-3477.html
(Facts and Details, 2014)
-- Top 4 ETFs for Investing in Vietnam
https://www.investopedia.com/articles/et...tnam-etfs/
(Investopedia, 29-Apr-2019)
-- How Will Foreign Investment Change Vietnam’s Economy?
https://www.voanews.com/a/how-will-forei...46702.html
(VOA, 25-Mar-2019)
-- New China Foreign Investment Law: Not Good News
https://www.chinalawblog.com/2019/04/new...-news.html
(China Law, 23-Apr-2019)
-- Saigon / HCMC / Chinese Get Chances to Invest in Vietnam Despite
Political Rifts
https://www.voanews.com/a/vietnam-and-ch...03661.html
(VOA, 17-Dec-2018)
-- Saigon /HCMC / Vietnam, with its low property prices, has become a
new treasure hunting ground for Hong Kong and China buyers
https://www.scmp.com/property/hong-kong-...w-treasure
(South China Morning Post, Hong Kong, 23-May-2019)
-- Saigon / HCMC / Big real estate developments and infrastructure
plans make Ho Chi Minh City Vietnam’s most lively city
https://www.webuildvalue.com/en/reportag...aigon.html
(We Build Value, 13-Feb-2019)
-- Growth quality concerns over disproportionate investment in Saigon
real estate
https://e.vnexpress.net/news/business/in...21792.html
(Vietnam Express, 13-May-2019)
-- HCMC wants $54 billion foreign investment
https://e.vnexpress.net/news/business/ec...20629.html
(Vietnam Express, 8-May-2019)
-- Saigon / HCMC / The Hot New Market for Luxury Property Is Vietnam
https://www.bloomberg.com/news/articles/...ty-markets
(Bloomberg, 18-Feb-2019)
-- How can Vietnam avoid becoming China’s dirty industrial backyard?
https://www.scmp.com/week-asia/economics...l-backyard
(South China Morning Post, Hong Kong, 9-May-2019)
-- The spoils of trade war: Asia’s winners and losers in US-China
clash
https://www.scmp.com/week-asia/geopoliti...hina-clash
(South China Morning Post, Hong Kong, 28-May-2019)
-- FAQs About The Special Economic Zones and Vietnam’s SEZ Draft Bill
https://www.thevietnamese.org/2018/08/fa...raft-bill/
(The Vietnamese, 28-Aug-2018)
-- Public criticism pressures Vietnam to back down on new economic
zones
https://www.chinadialogue.net/article/sh...omic-zones
(China Dialog, 26-Mar-2019)
