Business production hit because of lack of materials from China

Vietnam's reliance on Chinese materials has been clearly exposed during the Covid-2019 crisis, as imports from China have declined.

A report of the General Department of Customs (GDC) showed that of the $253 billion worth of import turnover in 2019, $75 billion came from China.

Business production hit because of lack of materials from China

This included $14.9 billion worth of machines, equipment, tools and input materials for domestic industrial production. The figure represented the 28 percent increase compared with 2018.

Cotton, fiber, fabric and input materials for the textile & garment and footwear alone were worth $11.52 billion.

Textile and Garment industry suffered the most from the material interruption caused by Covid-19, because 80 percent of input materials needed are imports from China.

According to Phan Van Viet, president of Viet Thang Jeans, large companies (that make products for export and use 80 percent of import materials from China) only store enough materials for production in February and March. If they cannot import more materials by mid-March, they will lack materials for production in April and May.

In case they cannot import materials by the end of March, the situation will be extremely difficult because the structure of the global supply chain will be broken.

In case they cannot import materials by the end of March, the situation will be extremely difficult because the structure of the global supply chain will be broken.

Small and medium enterprises (50 percent of products for export and 50 percent for domestic consumption) will bear the same fate as they rely on large enterprises in material supply.

Meanwhile, the companies which make products for domestic consumption, will not only lack materials, but also see consumption affected.

 

A representative of the HCMC Association of Garment and Textile (Agtek) said member companies have been put on tenterhooks as they cannot find alternative suppliers.

“Chinese partners informed that they will resume normal operation from February 20. If so, Vietnamese enterprises will have to wait more days for deliveries. If they still cannot resume operation, the situation will be extremely tense,” he said.

The representative said his company can place orders for input materials with South Korean enterprises, but the prices are high. His clients had designated Chinese suppliers. If he uses South Korean materials, he will have to re-negotiate the contracts.

The Vietnam Plastics Association (VPA) has sent a document to ministries asking to assist plastics companies to overcome difficulties in Covid-19 epidemic.

VPA’s chair Ho Duc Lam said China is Vietnam’s fourth largest export market for plastics, while a high number of Vietnam’s plastics manufacturers use material imports from China. If the epidemic lasts until the end of Q1, enterprises won’t have materials for production.

Meanwhile, Nguyen Quoc Anh, chair of the HCM City Rubber – Plastics Association, said most enterprises in the industry have enough materials for production until mid-March or early April.

Kim Chi 

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