China now ranks first among foreign investors in Vietnam

As of May 20, the total registered foreign investment capital had reached $16.74 billion, an increase of 69.1 percent compared with the same period last year, a record high in 5-month investment value of the last four years, according to MPI (Ministry of Planning and Invevtment).

Hong Kong led 88 countries and territories in terms of investment capital ($5.08 billion), which included $3.85 billion worth of capital contributed to Vietnam Beverage.

The investors from mainland China registered $2.02 billion worth of investments, while Taiwanese $575 million. As such, Chinese investors committed total investment capital of $7.6 billion.

The US-China trade war has caused the relocation of Chinese investments. After a long period of staying in the third or fourth position among biggest foreign investors in Vietnam, China has jumped to first, above Japan, South Korea and Singapore.

Five out of seven largest investment capital registered in the first five months of the year belonged to Chinese, namely $3.85 billion Beerco Ltd, $280 million ACTR tire manufacturing, $260 million Goertek, $214 million Advance Vietnam tire and $200 million Meiko electronics.

Hong Kong’s investors reserved 75% of their capital to buy into Vietnam’s enterprises, while only a quarter of capital was poured into existing and new projects. This shows that Hong Kong’s investors mostly make ‘passive investments’, i.e they contribute capital for profit, carry out M&As, and wait for opportunities.

Analysts note that the FDI capital from China mostly goes to textiles and garments, electric appliances, real estate and construction, low-tech processing and manufacturing projects with small capital.

Pham Chi Lan, a respected economist, has called for caution with Chinese investments after many problems occurred with Chinese-invested projects in the past – low technology, pollution, higher costs than initially planned, and low quality.

Sharing the same view, Le Cao Doan from the Vietnam Economics Institute said unlike 20 years ago, Vietnam now isn’t trying to attract foreign capital at any cost. Vietnam was thirsty for capital and accepted investments from many different sources, but not now.

In many cases, foreign investors register foreign invested projects, but they seek capital in Vietnam to implement the projects.

Doan said capital plays an important role in economic growth but the problem is not quantity, but quality, which brings reform and creates revolution in production methods.

Meanwhile, Vietnam cannot expect high quality from Chinese capital.

“Chinese capital doesn’t bring any revolution to production methods in Vietnam, but it makes it weaker,” he commented.