On the verge of another Chinese investing wave

Vietnam is currently on the receiving end of a new wave of mainland Chinese investment this year, with about US$1.8 billion of capital registered so far. Investors from Hong Kong have brought an additional US$1.3 billion to the table in year to date.

Mainland China is regularly listed in the ranks of Vietnam’s top foreign investors. To date, mainland China reports a cumulative investment sum touching US$11.94 billion – an amount made even more remarkable by the addition of Hong Kong’s cumulative US$17.65 billion investment.

A slew of large-scale investment projects from mainland China and Hong Kong have landed in Vietnam. These investments are highlighted by the US$4 billion South Hoi An mixed-use resort complex by Hong Kong group Chow Tai Fook, in the central region tourist magnet Hoi An; the US$2 billion coal-fired build-operate-transfer (BOT) thermal power plant Vinh Tan 1, in the southern province of Binh Thuan (with 95% stake held by a Chinese investor consortium); and the US$2.2 billion Hai Duong BOT thermal power plant (with 50% held by China Power Engineering Consulting Group Limited).

In recent years, scores of mainland China and Hong Kong-based investors in textile, dyeing, and fibre production have opened factories in Vietnam, looking forward to the anticipated opportunities in the Trans-Pacific Partnership deal. Texhong Group is one of the most noteworthy.

Texhong has successfully invested in a US$300 million-plus fibre plant in Hai Yen Industrial Park (IP) in the northern province of Quang Ninh, and is developing two more big projects. One is the first-phase Texhong Hai Ha IP infrastructure and the other is garment-textile production project, with a combined investment sum surpassing US$515 million. The group is also committed to developing a 2,000-megawatt thermal power plant in Mong Cai.

TAL, a leading Hong Kong investor in garment-textile processing for global brands, has made a foray into Vietnam through the opening of new plants in the northern province of Vinh Phuc, and is finding more investment locations in the country.

In addition to direct investment, there has been a sharp rise in the amount of stake purchased and capital contributions from mainland China and Hong Kong’s investors. Of the more than US$3 billion in committed investment from mainland China and Hong Kong into Vietnam, about US$400 million came in the form of stake purchase and capital contribution. From investors of mainland China alone, the amount comes to more than US$323 million.

New opportunities on the horizon

Major investments from mainland China and Hong Kong have made big contributions to Vietnam’s socio-economic development. Chinese investment projects have appeared across the board of Vietnam’s economy, from industrial production and energy, to textile, garment and footwear, and mining.

As a developing economy, it is important for Vietnam to receive investment from outside sources, especially in the context of mainland China and Hong Kong pushing up outbound investment.

Last year, Chinese investors spent US$183 billion on outbound investment ventures, a 44% jump on-year, turning China into the second-largest player in this field after the US.

“Other regional economies such as Laos, Myanmar, Malaysia, and Thailand are racing to lure Chinese investments. Vietnam is not an exception,” said senior financial expert Le Xuan Nghia.

The question is how to attract quality investment flow from China into Vietnam. Economist Truong Dinh Tuyen assumed that with suitable approaches, Vietnam can totally attract big investment volume from China, including in the high-tech field.

According to senior foreign investment expert Nguyen Mai, it is an urgent task for Vietnam to optimise the benefits that Chinese investment flow into Vietnam could bring.

In a meeting with leading Chinese CEOs last year, Vietnam’s Prime Minister Nguyen Xuan Phuc highly praised the role that Chinese investments has made to Vietnam’s economy and wished to see more quality investment sources from China flowing into Vietnam. “The Vietnamese government and people welcome good businesses as well as environmentally-friendly technologies and equipment from China,” said PM Phuc.

Meanwhile, the opportunities for Vietnam to woo more investment flow from Hong Kong into Vietnam have also proven bright. In early May, an investor mission from Hong Kong came to Vietnam on a quest for business opportunities.

In a recent meeting in Ho Chi Minh City, Tina Phan, Indochina regional director of Hong Kong Trade Development Council (HKTDC) stressed that there has been a wave of investors from Hong Kong into Vietnam searching for investment into transport infrastructure and wastewater treatment projects.

Phan expected the free trade agreement between ASEAN and Hong Kong that is coming into force will definitely bring multiple opportunities for Hong Kong businesses to bolster investment and trade into Vietnam.

HKTDC is reportedly bringing two business missions to Vietnam through January 2018. Besides for traditional fields such as garment production, agro-forestry, seafood item processing, and real estate, the investors are also interested in infrastructure investment and waste treatment under a public-private partnership model.

“Vietnam commits to creating the best conditions for all of you when doing business, on the principle of mutual benefit. We particularly call for investment into infrastructure, a capital-intensive field, specifically in railways, roads, air routes, and waterways,” PM Phuc said in a recent meeting with investors from Hong Kong.