ExclusiveInside China’s state-owned industrial park in Vietnam, Beijing’s image trumps trade war profits
- China-Vietnam (Shenzhen-Haiphong) Economic and Trade Cooperation Zone is only Chinese state-owned industrial park in Vietnam
- Venture has attracted increasing interest since start of US-China trade war, but operators say first duty is to support Xi Jinping’s trade initiative
Until the middle of 2018, business was slow for the only Chinese state-owned industrial park in Vietnam, located in the northeastern manufacturing hub of Haiphong and wholly-owned by the Shenzhen city government.
US President Donald Trump’s tariffs on Chinese goods enacted last year changed that, with 16 of the 21 Chinese companies that have relocated to the China-Vietnam (Shenzhen-Haiphong) Economic and Trade Cooperation Zone – many of them electronic device manufacturers – having done so since the start of the trade war.
However, profit-making was never the top priority for the park’s operators, which took over the reins from private investors after a series anti-Chinese riots raged through southern and central Vietnam in May 2014 forced the owners to abandon the project. Protesters set fire to other industrial parks and factories and attacked Chinese workers, killing more than 20 people and injuring more than 100.
While any commercial organisation would be thrilled at the rush of manufacturing firms into Vietnam, for the park’s operators, the first duty is to showcase the Chinese government’s top international economic cooperation project, the Belt and Road Initiative.
[They] requested that we make this industrial park a showcase for the Belt and Road Initiative, so that when our top leaders pay state visits to Vietnam, they can come to our park
The Shenzhen arm of the State-owned Assets Control and Supervision Commission (SASAC), which oversees all city owned companies “has requested that we make this industrial park a showcase for the Belt and Road Initiative, so that when our top leaders pay state visits to Vietnam, they can come to our park”, Chen Xu, vice general manager at the Vietnam-China Economic and Trade Cooperation Park (VCEP), told the South China Morning Post.
The Chinese industrial enclave in Vietnam is part of a largely untold story of the trade war. The common narrative is that Chinese and international firms are fleeing China to avoid paying tariffs, setting up in low-cost hubs in Vietnam and elsewhere in Southeast Asia, but the picture is more nuanced than that.
In Haiphong, a part of the Chinese government is actively encouraging firms to come to Vietnam, armed with US$200 million in investment capital and with a vision of creating 30,000 jobs by the time the entire three-phase project is completed in 2022.
The then-private VCEP project was suspended after the 2014 riots, and after the local government in Vietnam said it would reclaim the land unless it resumed, the Shenzhen government “decided to fully take over the project”, according to VCEP general manager Zhang Xiaotao.