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Vietnam effect varies for Chinese companies

By Zhou Yan (China Daily)
Updated: 2008-06-17 09:26

Chinese companies with large investments in Vietnam are complying with the stock exchange's requirement to report their real and potential risk exposure in the economically troubled country.

Chengdu-based New Hope Agriculture Stock Co, which owns four businesses in Vietnam, was among the first Chinese groups to declare the extent of its risks.

The Shenzhen Stock Exchange-listed company, announced last Saturday that its Vietnam businesses has to provide for an increase in financing costs deriving from higher bank charges for opening letters of credit. In addition, manufacturing, logistics and labor costs have all increased due to the sharp depreciation of the Vietnamese dong against the US dollar.

"The sales revenue of our feedstock businesses in our Vietnam group accounts for over one third of our total," a New Hope executive said.

He said that New Hope is already taking steps to minimize losses by adjusting the product structures of its Vietnam businesses.

However, the executive added that his company has identified new opportunities arising from the near economic meltdown. "Our market share is expected to expand rapidly because many smaller competitors have been forced out of businesses by the economic calamity," he said.

New Hope's three feedstock processing plants in Vietnam have continued to operate without disruption, according to the company's announcement. Their accumulated profit so far this year amounted to 30 million yuan ($4.3 million), it said.

GRG Yuntong Banking Equipment Co Ltd from Guangzhou said last Friday that its Vietnam operation in which the company has invested no more than 28,000 yuan mainly in office space, was not severely affected. "Our signed contracts in the market have been carried out naturally, and our debt is calculated in US dollars, which eliminates the currency and credit risks in Vietnam," its announcement said.

Guangdong Midea Electric Appliances Co, which operates a wholly owned subsidiary in Vietnam, with accumulated investment of 486.78 million yuan at the end of May, said that the host country's economic problems are having little, or no, impact on its Vietnam business which does not depend on the local market for parts, supply and sales of finished products.