Chinese investors step up acquisitions of Vietnamese firms amid Covid-19 crisis

The rise in the number of Chinese investors acquiring stakes in Vietnamese firms amid the Covid-19 pandemic has put domestic industry and production at risk, as domestic firms might gradually be pushed out of the market.

Employees work at a local apparel firm. The rise in the number of Chinese investors contributing capital and purchasing shares in Vietnamese firms amid the Covid-19 pandemic has put domestic industry and production at risk – PHOTO: VNA

According to data from the Foreign Investment Agency, Chinese investors were involved in more than 100 cases of capital contributions and share purchases at Vietnamese firms last month. This has brought the number of investments from Chinese investors during the year to 557 cases, with over US$230 million being invested in total. Compared with the same period last year, the number of transactions of this kind increased by 154 (over 38%), with an additional US$65 million.

As for direct investments, Chinese investors funded 135 projects in the January-April period.

This reflects the investors’ preference for capital contributions and share purchases rather than foreign direct investments.

The high number of transactions and capital from Chinese investors mostly target small- and medium-sized Vietnamese enterprises.

This investment trend is not a surprise to observers and foreign investment consultants.

According to experts, stagnant business and production activities as a result of the pandemic have attracted foreign investors, especially from China, for acquisition opportunities in Vietnam.

Truong Thanh Duc, a lawyer from Basico Law Firm, noted that the shares of many domestic firms have lowered in value significantly during the pandemic, allowing foreign investors with financial capacity and experience to quickly buy in.

Chinese firms have increased their investments in Vietnam over the past two years, and more opportunities are available for foreign investors due to the difficulties facing domestic firms during the current pandemic, according to Duc.

Before the Covid-19 outbreak, domestic firms had contacted Basico for consultation or support in selling their shares or transferring control to Chinese investors.

According to Duc, the Foreign Investment Agency’s data only reflects the tip of the iceberg, and actual acquisitions by Chinese investors could be even higher.

For instance, many Chinese enterprises and individuals, operating as Vietnamese firms, have been buying coastal estates or land in prime locations to convert their land-use purposes.

Vietnamese partners with a poor understanding of business and management activities can be exploited through capital contributions.

Chinese investors typically invest in sectors that are easy to enter based on similar experiences, where heavy investments, as in the case of service provision or goods production, are not required.

However, the acquisition of Vietnamese firms is not the only concern.

According to experts, once Chinese investors acquire Vietnamese businesses, it is likely that they will not increase investment and production but will import goods from China for export to a third country under Vietnamese-made labels.

Besides this, amid the China-U.S. trade war, China’s exports to the United States are in trouble. As such, Chinese firms have been incentivized to use Vietnam as a neutral zone to process goods before exporting them to the United States to avoid taxes.  

This practice would ultimately create problems for Vietnamese producers and attract high tax penalties on Vietnamese goods from importing countries.

Duc pointed out that if the pandemic lasts too long, more Vietnamese businesses will be acquired.

Instead of registering a new business, which involves several lengthy procedures, investors prefer to acquire operational firms, as this saves time and gives them access to an existing customer base, supply chains and human resources.

Apart from Vietnam, Chinese investors have enhanced acquisitions in other countries as well. Many of these countries, including India, have taken steps to control these acquisitions.

Experts believe that the domestic market should have effective investment policies in place and must introduce necessary regulations to ensure safe investment attraction and socioeconomic development. SGT

Hung Le

 
Vietnamese enterprises add jobs as Chinese supplies to int'l buyers are interrupted

Vietnamese enterprises add jobs as Chinese supplies to int'l buyers are interrupted

International manufacturers are seeking component suppliers in Vietnam, considering Vietnam as an alternative market in the context of Covid-19 escalation.

Supporting industries secure more orders following Chinese supply disruptions

Supporting industries secure more orders following Chinese supply disruptions

A number of local firms in supporting industries have been receiving more orders from foreign partners due to the coronavirus outbreak disrupting supply chains in China.

 
 

Other News

.
Policies encourage automakers to assemble cars in Vietnam
Policies encourage automakers to assemble cars in Vietnam
BUSINESSicon  06/08/2020 

 Several automakers are considering assembling their best-selling models in Viet Nam due to the Government’s policy of zero import tariffs on components and a 50 per cent reduction in registration fees.

Thai firms acquire wind power farm in Ninh Thuan
Thai firms acquire wind power farm in Ninh Thuan
BUSINESSicon  06/08/2020 

Thailand’s Banpu and its power business arm Banpu Power (BPP) have joined forces to acquire El Wind Mui Dinh, an onshore wind farm in the south-central province of Ninh Thuan, in a deal worth $66 million.

EVFTA smooths the way for Vietnamese farm produce
EVFTA smooths the way for Vietnamese farm produce
BUSINESSicon  06/08/2020 

The EU-Vietnam Free Trade Agreement, at its core, aims to liberalise both tariff and non-tariff barriers on key exports of both sides over a period of 10 years.

Vietnam receives positive view in global exports as EVFTA takes effect: report
Vietnam receives positive view in global exports as EVFTA takes effect: report
BUSINESSicon  05/08/2020 

Vietnam is expected to continue growing its share of global exports despite decline amid the resurgence in the COVID-19 pandemic after three months of no local transmissions, according to an HSBC report.

Local banks are racing to catch digitisation trend: expert
Local banks are racing to catch digitisation trend: expert
BUSINESSicon  05/08/2020 

Vietnam has seen a digital wave in the finance-banking industry, with many lenders investing significantly in digitisation, experts have said.

Experts call on Vietnamese government to aid businesses again
Experts call on Vietnamese government to aid businesses again
BUSINESSicon  05/08/2020 

Amid the new COVID-19 outbreak, experts have suggested the Government offer another credit support package to help enterprises, especially large businesses in key areas.

Vietnam's textile and apparel firms lack orders for the last two quarters
Vietnam's textile and apparel firms lack orders for the last two quarters
BUSINESSicon  05/08/2020 

The Ministry of Industry and Trade said that textile production increased by 1.8 per cent, while clothing production decreased by 4.6 per cent in the first seven months of this year over the same period last year.

New power pricing mechanism to be applied next year
New power pricing mechanism to be applied next year
BUSINESSicon  05/08/2020 

The common retail power price is expected to be applied at the beginning of next year together with the current tiered pricing mechanism, said Deputy Minister of Industry and Trade Do Thang Hai.

VN tra fish companies see profits slump in pandemic
VN tra fish companies see profits slump in pandemic
BUSINESSicon  05/08/2020 

Multiple tra fish companies suffered losses due to falling export prices and lower orders, focusing instead on the domestic market amid the COVID-19 pandemic.

EVFTA hoped to help with sustainable poverty reduction in Vietnam
EVFTA hoped to help with sustainable poverty reduction in Vietnam
BUSINESSicon  05/08/2020 

The EU-Vietnam Free Trade Agreement (EVFTA), which came into force on August 1, is hoped to create a driving force to help Vietnam reap further achievements in poverty reduction and economic growth.

Analysts: High-end hotels hold appeal among investors
Analysts: High-end hotels hold appeal among investors
BUSINESSicon  05/08/2020 

Analysts from real estate consultant Jones Lang LaSalle have said domestic and foreign investors alike are actively seeking to purchase high-end hotels in downtown areas, mostly due to limited land supply.

Economists warn of ‘psychological inflation’ in Vietnam
Economists warn of ‘psychological inflation’ in Vietnam
BUSINESSicon  06/08/2020 

The high CPI increase in the first half of the year will challenge the regulation of goods and service prices in the remaining months of the year, experts say.

Capital is cheap, but there are few borrowers
Capital is cheap, but there are few borrowers
BUSINESSicon  06/08/2020 

The capital cost has never before been so low. In the interbank market, the VND overnight interest rate was 0.13 percent per annum on July 8, according to the State Bank of Vietnam.

Wooden plank exporters struggle with higher tax rates
Wooden plank exporters struggle with higher tax rates
BUSINESSicon  04/08/2020 

The Vietnam Timber and Forest Product Association has sent an urgent petition to the Ministry of Finance, Ministry of Agriculture and Rural Development and Ministry of Industry and Trade about congestion of wooden planks

E-wallet firms battle for slice of cashless payment pie
E-wallet firms battle for slice of cashless payment pie
BUSINESSicon  04/08/2020 

E-wallets firms are battling for a piece of the cashless payment market amid rapid growth in the context of the COVID-19 pandemic.

Corporate income tax reduction comes into effect
Corporate income tax reduction comes into effect
BUSINESSicon  04/08/2020 

Resolution 116/2020/QH14 granting a reduction of 30 per cent on corporate income tax (CIT) for eligible enterprises officially came into effect on Monday.

Big rearers win big
Big rearers win big
BUSINESSicon  04/08/2020 

Many animal husbandry enterprises are leveraging the pork supply shortage to sell at high prices, earning huge profits

VN businesses slow in preparing to enjoy preferential tariffs in EVFTA
VN businesses slow in preparing to enjoy preferential tariffs in EVFTA
BUSINESSicon  04/08/2020 

 Experts have raised concerns that Vietnamese businesses are slow in preparing conditions to enjoy preferential tariffs in the Viet Nam-EU Free Trade Agreement (EVFTA).

Probe into Tenma Vietnam’s alleged bribery underway: police official
Probe into Tenma Vietnam’s alleged bribery underway: police official
BUSINESSicon  04/08/2020 

The investigation into the Japanese-invested Tenma Vietnam company’s allegation of bribing civil servants and tax and customs officers of northern Bac Ninh province is still ongoing, according to a police official.

VN textile, electronics hardest hit in pandemic: official
VN textile, electronics hardest hit in pandemic: official
BUSINESSicon  04/08/2020 

Textile and electronics have been the two export-oriented sectors mostly impacted by the COVID-19 pandemic, an official has said.

 
 
 
Leave your comment on an article

OR QUICK LOGIN