A Vietnamese delegation’s visit to China last week highlighted the growing economic ties between the two territorial rivals, which analysts say poses a challenge to South Korea’s dominance of investment in Vietnam.
From April 7 to 12, Vietnamese National Assembly Chairman Wang Dinh Hue led a high-level delegation to meet with Chinese President Xi Jinping.
Hue suggested that the two countries create new impetus for trade development and “dovetail the development strategies of Vietnam and China.”
He also met with many heads of large Chinese companies who want to participate in Vietnam’s infrastructure construction.
China is Vietnam’s largest trading partner and is becoming Vietnam’s largest foreign direct investor.
A representative of the Korean Chamber of Commerce and Industry in Vietnam (KCCI) told Nikkei Asia last week that Chinese companies are boycotting Korean companies as China increases investment in Vietnam.
“In terms of cumulative investment in Vietnam since 1988, South Korea ranks first with US$85.8 billion, ahead of Singapore and Japan. But in recent years, South Korea has been competing neck-and-neck with China.” Kim Hyung-mo told Japan Asia News magazine.
The latest data provided by Vietnam’s Ministry of Planning and Investment show that South Korea’s foreign direct investment since 1988 is US$87 billion, accounting for more than 18% of the total, followed by Singapore (US$76 billion), Japan, Taiwan and Hong Kong.
But by 2023, South Korea will rank fifth, behind Singapore, Japan, Hong Kong and China, leading in the number of newly registered projects.
Joffrey Madatu Kalimag, an assistant professor at the Department of Global Business Management at Kyungsung University in Busan, South Korea, said that competition between Korean and Chinese companies is becoming increasingly fierce.
“South Korean conglomerates like Samsung Electronics Co., Ltd. have significantly increased investment or R&D spending to counter Chinese investment in mobile technology,” he told VOA.
“Chinese companies have shown impressive growth in R&D, which may intensify competition among Korean companies in Vietnam. These, combined with China’s technological advances, pose significant challenges to Korean companies operating in the region, “He said.
South Korea’s Samsung is by far the largest single foreign investor in Vietnam.
Vietnamese hanoi times According to reports, Samsung’s investment in Vietnam will exceed US$1 billion in 2023, with a total investment of more than US$22 billion, and it is expected to invest another US$1 billion every year.
South Korean lens module manufacturer LG Innotek announced last year that it would invest an additional US$1 billion in Haiphong City, bringing the company’s total investment in Vietnam to more than US$2 billion.
But Chinese investment is heating up.
The Vietnamese Ministry of Trade said this month that Chinese automaker Chery signed a joint venture agreement with a Vietnamese company to invest US$800 million to build a factory in Vietnam, becoming the first Chinese electric vehicle manufacturer to invest in Vietnam. China’s BYD, the world’s largest electric car maker, also plans to set up a factory in Vietnam.
Reuters reported in November that Chinese solar panel maker Trina Solar planned to nearly double its investment in Vietnam to nearly $900 million. Trina Solar is one of five Chinese solar companies that the United States says uses factories in Southeast Asia to evade tariffs on Chinese-made panels.
Chinese economist and financial commentator He Jiangbing pointed out that since Sino-US trade tensions broke out in 2018, many Chinese companies have invested in Southeast Asia to avoid tariffs on Chinese products. He said that China’s domestic overcapacity has also forced Chinese companies to speed up their overseas deployment.
“The focus in Southeast Asia is Vietnam because [China and Vietnam] Geographically closer. Vietnam also has a large population, with more than 100 million people. It also hoards a large part of the industrial chain transferred from mainland China. “He said, “Wherever the industrial chain moves, Chinese companies will follow. “
Vietnamese-American economist Nguyen Tri Hieu said Vietnam is politically closer to China, a one-party communist state, than democratic South Korea.
He told VOA: “In Vietnam, there is a saying that the relationship between China and Vietnam is like teeth and lips. South Korea is even more distant politically. I would say [South] South Korea is important, but not in the same status as China. “
But unlike Hanoi, there is no territorial dispute between Seoul and Beijing that could upend their relationship.
China and Vietnam’s claims to the South China Sea have not stopped trade and investment, but have sometimes been slowed by conflict and tensions.
Beijing claims sovereignty over much of the South China Sea, putting it on a collision course with Brunei, Indonesia, Malaysia, the Philippines, Taiwan and Vietnam.
Adrianna Zhang contributed to this report.
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