Vietnam’s Ministry of Planning and Investment (MPI) has warmed of negative impacts of a surge of Chinese direct investment on Vietnam’s economy although Vietnam is in dire need of overseas capital to bolster its fast economic growth.
Vietnam has seen a strong capital influx from China. Photo: Cato Institute.
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China took the lead among 88 countries and territories investing in Vietnam with US$7.6 billion in the first five months of this year, including US$2.02 billion from the mainland China, US$5.08 billion from Hong Kong and US$575 million from Taiwan, according to the MPI.
A drastic surge in FDI from China also brings concerns, Zing.vn quoted the ministry as saying.
First, the upgrade of technologies in China can result in dumping China’s outdated and environmentally unfriendly technologies in Vietnam.
Second, massive FDI influx from China to other countries including Vietnam may put considerable infrastructure and social pressure on some localities as well as lead to the inability to control and oversee Chinese investors in the country.
Third, through mergers and acquisitions, many Vietnamese enterprises may fall under the Chinese control.
Fourth, Chinese goods bearing made-in-Vietnam label to evade punitive tax from the US or benefit from preferential treatments under FTAs which Vietnam is a signatory country could pose risk to Vietnamese exports, especially exports to the US.
Lastly, the escalating trade war between China and the US and the possible increase of foreign currency inflows into Vietnam may have influence on inflation.
The ministry proposed some solutions for the aforementioned possible adverse impacts and prevent the low-quality FDI from China to Vietnam
Vietnam needs to set up technical barriers, raising the standards of environment, resources, technology, product specifications among others in accordance with those of the region and the world.
Besides, Vietnam should issue policies to better control foreign organizations and individuals owning real estate in Vietnam with Vietnamese citizens as nominees.
According to the ministry, the Vietnamese government should improve the inspection and examination of licensed projects, aiming to ensure that the investors comply with the commitments and implementation schedule specified in the contracts.
Tighter conditions on foreign capital contribution and stake acquisition of Vietnamese companies should be in place, in addition, it is necessary to apply regulations on national security for certain areas and sectors of FDI.
