Vietnam riots 'will hurt investment from China'

Anti-China protests in Vietnam will deter Chinese investment and lead to local job losses. Many Chinese companies and traders have initiated contingency plans and stopped trade activities to safeguard employees and minimize financial losses.

Rioters attacked Vietnam's biggest steel plant overnight as violent anti-China protests spread and escalated in the country.

Vietnam's Industry and Trade Minister Bui Quang Vinh told local newspaper Tien Phong that if the violence can't be contained, the country's economic development will be damaged because foreign companies will abandon ideas of investing in Vietnam.

Not only Chinese factories have been affected. Manufacturing facilities owned by Japanese, South Korean and European companies have also been damaged by mobs. They may also stop investing in Vietnam as they need a safer environment to carry out production, Bui was quoted as saying by the Vietnamese daily newspaper.

The newspaper quoted Tran Van Hang, chairman of the National Assembly's committee for external relations, as saying that the unstable situation in Vietnam has already caused concern among foreign investors and affected their production in the country.

"The government's top priority should be how to ensure healthy economic growth in 2014," said Hang.

Even though the Vietnamese economy has developed faster than neighboring Cambodia and Laos in recent years, the country still needs a large amount of investment and technical support from China to improve communication, power supply and transportation networks.

Liang Xiaodong, director of sales at SAIC-GM-Wuling Automobile Co Ltd, a joint venture of SAIC Motor Corp, Liuzhou Wuling Motors Co and GM China, said the company has suspended shipments of vehicles to Vietnam amid the turmoil.

"These changes could make Vietnam more vulnerable to unexpected financial risks. It cannot afford having a worsening business environment with China as its economic development level is far behind Japan or the United States," said Li Quan, deputy director of the School of International Trade and Economics at Peking University.

China's investment in Vietnam increased sharply in 2013, with 89 newly licensed projects and capital injections into existing 11 projects, bringing the total investment to more than $2.3 billion. That was up from $371 million in 2012, data from the Beijing-based China Chamber of International Commerce show.

Li said companies in China's Pearl River Delta region will no longer consider Vietnam as an ideal destination, and Cambodia and Myanmar are likely to gain at Vietnam's expense.

Xiao Yanlan, a superviser in the communications department of Guangdong Midea Electric Appliances Co Ltd, which has invested $25 million in production facilities in Vietnam, said that Midea is reviewing the situation and will do "whatever it takes" to avoid risks.

Long Guoqiang, director-general of the general office of the Development Research Center of the State Council, said if the unrest isn't addressed promptly, it will definitely affect the bilateral investment and trade relationship.

"For any country, a stable political environment is an important component of the investment environment. If Vietnam still wants to attract more foreign investment and develop its foreign trade, the rational choice would be to appease those behind the unrest immediately," Long said.