Economy

Markets

Industries

Insights

Reports

Events

Firms face difficulties across border

By Diao Ying (China Daily)
Updated: 2008-06-10 09:14

Chinese investors in Vietnam are facing troubles amid the market turmoil in that country.

Many of them have had to convert their dong holdings into US dollars for fears of further depreciation. Some are facing labor unrest, with workers asking for pay rises to tackle the rising inflation. But most don't intend to shut up shop and move out of the country as they have adopted a wait-and-see policy.

According to Yang Zhen, chairman of the Business Association of China in Vietnam, Chinese enterprises there are having problems getting loans. Raw material and labor costs have also been rising.

Yang's opinion is echoed by Deng Xiaohua, a manager of Sichuan New Hope Group, the largest food company in China with an investment of $4.68 million in Hanoi.

Deng said banks in Vietnam have been asking companies like his to pay a deposit as high as 90 to 110 percent since the crisis. Earlier, banks would happily allow them to do business using letters of credit. The company is thus facing capital flow problems.

Chinese enterprises have also been suffering income losses as the dong has been depreciating. "If you go to the bank and exchange dong to US dollar today, you have to wait for your turn for 15 days because so many people want to do the same," National Business Daily quoted a Chinese car parts seller in Vietnam as saying. "By the time the conversion is made, the dong will have depreciated even more."

Vietnamese workers in some companies have also gone on strike demanding higher wages. Yang said the head of a plastic bag company from China was attacked during a strike and had to hide in a government hotel. Although the local government protects Chinese enterprises, small and medium-sized business will be affected if the strikes go on.

Yang said the large companies are less vulnerable to the market turmoil than the smaller ones. Most listed Chinese companies say their businesses have not been influenced much so far since the investment in Vietnam is small compared with the operation at home.

Zongshen Motorcycle Group, for instance, says the impact on it so far has been relatively small and the company plans to wait and see for a while before adjusting its policies.