China businesses skirt pollution laws by relocating manufacturing to Vietnam
Hanoi , Vietnam -- Before he left his native China two years ago, Li Shaoxing was losing money at his plastic-bag factory in the center of the country. Though his homeland had become synonymous with plentiful cheap labor and limitless manufacturing spoils, he was grappling with rising wages, energy shortages and flat prices for his goods.
So, much as capitalists have always done, Li went looking for an easier place to profit. He ventured south of the border, putting up a factory here in a new industrial park in northern Vietnam, where wages are roughly one-third cheaper than at home and where workplace safety and environmental standards are in scant evidence.
"The competition in China is intense, and the investment in Vietnam made sense," Li said, sitting in his air-conditioned, glass-fronted office, as 500 workers toiled in an adjacent factory bay amid the clatter of machinery and the smell of melting plastic. "In this area, workers have a hard time finding jobs. They are happy for any work, and they are willing to eat a lot of bitterness."
Much as manufacturers in the United States have transferred jobs to Latin America and just as Western European factories now look to Poland and Hungary, China's modern-day capitalists are increasingly focused on wringing profit from Southeast Asia. They are tapping new markets for sales and farming out work to people willing to labor for less than at home and in even tougher conditions. In a global economy driven by the pursuit of lower costs and fatter profit -- a drive that has led so many multinationals to low-wage China -- Southeast Asia is emerging as China's own version of China.
"It's a bit like the United States and Mexico," said Deng Weiwen, general manager of TCL (Vietnam) Corp., the local arm of the giant Chinese television maker, which established a factory outside Ho Chi Minh City in 1999. "China and Vietnam complement each other."
In Vietnam, Chinese entrepreneurs have found a country -- much like their own -- in the midst of a wrenching transition from communism toward an economy governed by market forces. Chinese investors are already accustomed to doing business in a place where personal relationships and access to power often trump the law.
"We have no problem understanding that bribes have to be paid to get things done," said Zou Qinghai, a textile entrepreneur who heads the chamber of commerce for the Chinese province of Zhejiang in Hanoi. "Vietnam's way of developing is simply a copy of China's."
For now, China's investment in Vietnam remains in infancy. Since 1988, Vietnam has attracted more than $50 billion, with roughly half coming from Taiwan, Singapore, Japan and South Korea, according to state figures. Mainland China has injected only $734 million while competing for foreign investment.
But much mainland money is filtered through partners in Hong Kong, which have sunk $3.7 billion in Vietnam since 1988, according to state figures. Chinese investment has surged in recent years. China has become Vietnam's largest trading partner, with two-way commerce expected to reach $7.5 billion this year, according to government figures.
"We figure that China will develop faster in the future, and Chinese businesses will have more interest in investing outside of the country," said Nguyen Anh Tuan, vice director for Vietnam's Foreign Investment Agency in Hanoi. "The potential for Chinese investment in Vietnam is very great."
Foreign multinationals with factories in the Pearl and Yangtze river deltas -- China's principal manufacturing zones -- are increasingly exploring Vietnam and other areas of Southeast Asia as alternatives to expanding in the Middle Kingdom. This is particularly so for Japanese firms, which fear the consequences of diplomatic sparring and street protests over Japan's perceived unwillingness to take responsibility for wartime atrocities.
Among Chinese companies in Vietnam, many have focused on locking up natural resources and energy. In October, as Chinese President Hu Jintao visited Hanoi, China National Offshore Oil Corp. signed a deal with a local energy firm to jointly explore for oil and gas in Vietnam's Beibu Bay.
Chinese manufacturers are now expanding into Vietnam, in part to lock up shares of the Southeast Asian market ahead of the creation of a planned free-trade agreement with China. Textile and garment-makers are shifting to Vietnam to sidestep quotas on their shipments into Europe and the United States.
Some investment is propelled by stricter enforcement of environmental standards in some areas of China. According to entrepreneurs in China who spoke on condition of anonymity for fear of angering government officials, leaders in coastal areas have been encouraging pollution-intensive industries such as plastics, steel and electronics to consider relocating to Southeast Asia.
A strong push is coming from Wenzhou, a city in Zhejiang province south of Shanghai that has long served as a locomotive for growth in China's private sector.
In recent months, officials in Wenzhou have convened roundtables with local entrepreneurs to encourage major polluters to move. At one meeting, a vice mayor of Wenzhou specifically declared that high-polluting industries would be deprived of access to land, water and electricity, according to two participants.
This year, the Wenzhou city government and the Zhejiang provincial government have jointly organized roughly 50 all-expenses-paid trips for local businesses to survey prospective industrial sites in Vietnam and elsewhere in Southeast Asia, the entrepreneurs said.
While few would describe China as a beacon of labor safety or high wages, Chinese investors acknowledged in interviews that Vietnam beckons as an even cheaper, less regulated place to run a factory.
"Here, the workers can really accept hardship," said Qing Song, deputy general manager at Lifan Vietnam, a motorcycle factory opened outside Hanoi by a Chinese company. "Whatever requirements you set out for them in a day, they meet."
At the factory on a recent afternoon, men uncoiled sheaths of aluminum without protective gloves, while others operated heavy machinery without goggles or earplugs. The work went on beneath corrugated aluminum ceilings in poorly ventilated structures. Men in flip-flops used a donkey cart to move bricks to a construction site.
By Peter S. Goodman - The Washington Post - December 11, 2005.
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