07-02-2019, 08:57 PM
*** 3-Jul-19 World View -- Vietnam to gain from collapse of US-China trade talks
This morning's key headlines from GenerationalDynamics.com
****
**** Vietnam to gain from collapse of US-China trade talks
****
![[Image: g140514b.jpg]](http://Media.GenerationalDynamics.com/ww2010/g140514b.jpg)
Anti-Chinese protesters in Vietnam in 2014 (AFP)
Thanks to China's new Foreign Investment Law and the apparently
complete collapse of the US-China trade negotiations, companies doing
business in China are now considering moves to China's neighbors,
especially Vietnam.
China passed its Foreign Investment Law in March. It allows any
Chinese Communist Party (CCP) official to visit a foreign-owned
business with offices in China 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 mostly collapsed, although
the talks may be revived as a result of last week's meeting between
Donald Trump and Xi Jinping.
****
**** Business opportunities in 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’s economy today is one of the fastest-growing and most vibrant
in the world. GDP grew at 7% in 2018, with similar growth forecast for
2019.
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 generational crisis 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.
For example, China's wireless earphone maker GoerTek has expressed an
intent to move production to Vietnam, to avoid the tariffs, because
labor is cheap, and because Vietnam is close by. Taiwan's massive
tech firm Hon Hai Precision Industry Company, better known as Foxconn,
has begun moving its production to Vietnam in recent months.
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 do business 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 North-South crisis civil 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. These reforms were inspired by Deng Xiaoping's
'Reform and Opening Up' of China in 1978.
****
**** Doing Business in North Vietnam after the US-China negotiations
****
Most companies moving their production facilities from China to
Vietnam to evade US tariffs want to select 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.
Capital inflows from mainland China, Hong Kong and Macau stood at $700
million in 2011, but by last year had topped $2.4 billion. China is
the fifth biggest investor in Vietnam behind Japan, South Korea and
Singapore. But critics, especially among North Vietnamese, 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.
****
**** Doing business in South Vietnam -- Ho Chi Minh City (HCMC or Saigon)
****
Those who wish to do business 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. The following are average property prices in Asian cities,
per square meter:
According to one study, 35,000 new apartments were put on the market
between 2015 and 2018. During 2016-17, developers and corporate
buyers snapped up about $1.2 billion of residential-zoned land. Most
of this was from foreign buyers, mostly from South Korea, Hong Kong
and China. According to estimates, over a third of historic old
Saigon city buildings have been destroyed in the last 20 years to make
room for new construction.
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.
This should represent a big opportunity for investors or for
businesses that would like to relocate to South Vietnam, because of
low-cost labor, low-cost housing, and government incentives for
foreign investment.
Sources:
KEYS: Generational Dynamics, China, Vietnam, North Vietnam, South Vietnam,
Vietnamese Kingdom, Champa Kingdom, Indonesia, Malaysia,
Tay-Son rebellion, France, Ho Chi Minh, Vietnam War, Doi Moi,
Hanoi, Ho Chi Minh City, HCMC, Saigon
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
This morning's key headlines from GenerationalDynamics.com
- Vietnam to gain from collapse of US-China trade talks
- Business opportunities in Vietnam
- North vs South Vietnam
- Doing Business in North Vietnam after the US-China negotiations
- Doing business in South Vietnam -- Ho Chi Minh City (HCMC or Saigon)
****
**** Vietnam to gain from collapse of US-China trade talks
****
Anti-Chinese protesters in Vietnam in 2014 (AFP)
Thanks to China's new Foreign Investment Law and the apparently
complete collapse of the US-China trade negotiations, companies doing
business in China are now considering moves to China's neighbors,
especially Vietnam.
China passed its Foreign Investment Law in March. It allows any
Chinese Communist Party (CCP) official to visit a foreign-owned
business with offices in China 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 mostly collapsed, although
the talks may be revived as a result of last week's meeting between
Donald Trump and Xi Jinping.
****
**** Business opportunities in 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’s economy today is one of the fastest-growing and most vibrant
in the world. GDP grew at 7% in 2018, with similar growth forecast for
2019.
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 generational crisis 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.
For example, China's wireless earphone maker GoerTek has expressed an
intent to move production to Vietnam, to avoid the tariffs, because
labor is cheap, and because Vietnam is close by. Taiwan's massive
tech firm Hon Hai Precision Industry Company, better known as Foxconn,
has begun moving its production to Vietnam in recent months.
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 do business 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 North-South crisis civil 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. These reforms were inspired by Deng Xiaoping's
'Reform and Opening Up' of China in 1978.
****
**** Doing Business in North Vietnam after the US-China negotiations
****
Most companies moving their production facilities from China to
Vietnam to evade US tariffs want to select 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.
Capital inflows from mainland China, Hong Kong and Macau stood at $700
million in 2011, but by last year had topped $2.4 billion. China is
the fifth biggest investor in Vietnam behind Japan, South Korea and
Singapore. But critics, especially among North Vietnamese, 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.
****
**** Doing business in South Vietnam -- Ho Chi Minh City (HCMC or Saigon)
****
Those who wish to do business 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. The following are average property prices in Asian cities,
per square meter:
- Hong Kong $48K
- Singapore $30K
- Tokyo $18K
- Taipei $15k
- Bangkok $9K
- HCMC $8K
- Hanoi $7K
According to one study, 35,000 new apartments were put on the market
between 2015 and 2018. During 2016-17, developers and corporate
buyers snapped up about $1.2 billion of residential-zoned land. Most
of this was from foreign buyers, mostly from South Korea, Hong Kong
and China. According to estimates, over a third of historic old
Saigon city buildings have been destroyed in the last 20 years to make
room for new construction.
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.
This should represent a big opportunity for investors or for
businesses that would like to relocate to South Vietnam, because of
low-cost labor, low-cost housing, and government incentives for
foreign investment.
Sources:
- How Will Foreign Investment Change Vietnam’s Economy? (VOA, 25-Mar-2019)
- New China Foreign Investment Law: Not Good News (China Law, 23-Apr-2019)
- Saigon / HCMC / Chinese Get Chances to Invest in Vietnam Despite Political Rifts (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 (South China Morning Post, Hong Kong, 23-May-2019)
- Growth quality concerns over disproportionate investment in Saigon real estate (Vietnam Express, 13-May-2019)
- HCMC wants $54 billion foreign investment (Vietnam Express, 8-May-2019)
- How can Vietnam avoid becoming China’s dirty industrial backyard? (South China Morning Post, Hong Kong, 9-May-2019)
- The spoils of trade war: Asia’s winners and losers in US-China clash (South China Morning Post, Hong Kong, 28-May-2019)
- FAQs About The Special Economic Zones and Vietnam’s SEZ Draft Bill (The Vietnamese, 28-Aug-2018)
- Public criticism pressures Vietnam to back down on new economic zones (China Dialog, 26-Mar-2019)
KEYS: Generational Dynamics, China, Vietnam, North Vietnam, South Vietnam,
Vietnamese Kingdom, Champa Kingdom, Indonesia, Malaysia,
Tay-Son rebellion, France, Ho Chi Minh, Vietnam War, Doi Moi,
Hanoi, Ho Chi Minh City, HCMC, Saigon
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
