February 23, 2020 12:42

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Chinese investors are rushing into Vietnam

09:52 | 17/08/2019

VCN - “Up to now, Sao Do Group has worked with hundreds of Chinese investors. On average, I receive 5-8 Chinese investors per week. Even every day, there are the group of 15-20 businesses coming,” said Nguyen Thanh Phuong, General Director of Sao Do Group (Hai Phong).

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In 7 months, China is the largest investor in Vietnam with USD 1,785.6 million, accounting for 21.6% of total newly registered capital. Photo: Nguyen Thanh.

5-8 investors per week

According to the latest statistics of the Ministry of Planning and Investment, the total foreign direct investment (FDI) in Vietnam registered for new and increased capital in the first 7 months of this year reached 11,698 million USD, down 35.6% compared to the same period in 2018. Implemented FDI in 7 months was estimated at 10.6 billion USD, up 7.1% over the same period in 2018. Notably, among 65 countries and territories with newly licensed investment project in Vietnam in 7 months, China is the largest investor with USD 1,785.6 million, accounting for 21.6% of the total newly registered capital.

Talking to reporters from the Customs newspaper, Mr. Nguyen Thanh Phuong - General Director of Sao Do Group (Hai Phong) said: “In general, the current wave of FDI investors is studying investment in Southern industrial parks. Dinh Vu (Sao Do Group owns the investment) as well as in Hai Phong city in general increased quite a lot. The number of current investors seeking investment has increased 3 times compared to the same period last year. Most of them are investors from China. Specifically, the rate of Chinese investors previously accounted for 40%, now has increased to 70-80%. That is, before 10 customers of Sao DoGroup had 4 Chinese customers, now in 10 customers, there are 7-8 Chinese customers.”

Foreign investors investing in China now explore and consider the Vietnamese market. Mr. Nguyen Thanh Phuong said that this is mainly investors from Korea and Japan. They did not say that the investment shift was just an expansion of production investment while maintaining a factory in China and expanding investment to Vietnam. “However, I think it's a shift. Maybe in the short term, investors maintain factories in China, expand more investments in Vietnam, but in the long term, they will probably close factories in China,” Mr. Phuong said.

Trade war leads to tax avoidance

Currently, Chinese investors have come to study Nam Dinh Vu industrial park which operates in diverse fields such as furniture, household appliances, toys, accessories for electronics automotive industry.

According to Mr. Nguyen Thanh Phuong, there are businesses that send experts to work 4-5 times with Sao Do Group, conduct surveys, compare geology, conditions, sources of input materials, conditions of license, legal procedures, but they have not decided to invest yet. On average for Chinese investors, it takes at least 4-6 months to make a decision. However, there are also investors from Japan, although they have come to find out for nearly 2 years, they have not made a decision yet.

In the future, Mr. Phuong assesses the potential of investment shift from China to Vietnam. In terms of land fund, Sao Do Group is ready to meet the demand of about 150ha for investors. In addition, the Group is also ready to meet the demand for electricity, water and energy with a capacity of about 60 MW.

Referring to the impact of the US-China trade war on the shift of investment from China to Vietnam, economic expert Tran Toan Thang said to Customs news: “Risks from the Chinese economy, especially the trade war, can lead to a rapid increase in investment flows from China into Vietnam because investors want to avoid additional taxes when exporting to the US. The data for the first months of 2019 also witnessed this fast rising trend. However, it should be noted that in 2019, Vietnam also has two FTAs, creating more opportunities for investors: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Vietnam-EU FTA. (EVFTA). Therefore, it is difficult to separate the real impact of the trade war on investment from China into Vietnam.

“In principle, you can see more about their type of production. If it is an assembling investment based on input components imported from China, it can be considered a tax avoidance investment. However, if enterprises invest in producing inputs for other enterprises, it can be considered as a result of the FTAs. However, we do not have enough information to separate, so it is difficult to conclude how much the trade war increases investment from China into Vietnam. Of course, logically, commercial warfare could lead to such a tax-avoidance investment,” Thang said.

Currently referring to FDI from China, authorities in many localities expressed their caution and reservations, fearing that investors may bring old technologies to Vietnam.

Mr. Tran Toan Thang also said: “This is a major concern today. Investment shift from China (of both Chinese enterprises and FDI enterprises in China), especially upstream industries can lead to consequences for the environment. Regarding the investment registration process, Vietnam has taken steps to control this (technology appraisal committee, or appraise and approve environmental impact assessment reports). The question is how to implement these steps in practice today?”

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"It is actually legally difficult to have a separate screening mechanism with investors from China because Vietnam has integrated and applied fair treatment to investors. The problem of the implementation and supervision of the implementation of regulations and the awareness of local authorities related to attracting FDI,” said Tran Toan Thang.

By Thanh Nguyễn/Bui Diep