Experts see dangers in Chinese takeover deals in textile industry

More and more Vietnamese textile producers have sold their companies to Chinese investors to become Chinese satellite companies.

Nguyen Van Hoan, former president of the Hanoi College of Textile, Garment Industry & Fashion, noted that Chinese have taken over existing Vietnamese companies because this method allows them to avoid strict regulations.

Local authorities now do not encourage investments in the textile industry because textile factories cause big environmental problems. Therefore, taking over operating enterprises would be the shortest way for Chinese to expand their production in Vietnam.

What makes Hoan worried is that Chinese try to poach Vietnamese skillful workers from Vietnamese enterprises while not having to pay for training cost.

Thai Tri Dung from the HCM City Economics University also noted that a series of merger & acquisition (M&A) deals have been made recently between Vietnamese and Chinese in the textile & garment industry.

“Their (Chinese) actual goal is to set up a network which can provide workers to them. It is reasonable to think that Chinese would attract skilled workers from Vietnamese enterprises,” he said, adding that Vietnamese enterprises should think carefully about whether to become satellite companies in Chinese chains.

Dung pointed out that the Chinese move of taking over Vietnamese companies would influence  human resource development and export. Therefore, he recommended to ‘remain very cautious about deals with Chinese businesses’.

He went on to say that once Vietnamese companies become Chinese subsidiaries, Vietnam’s export markets would become China’s markets.

In theory, "Vietnam exports products, but China pockets money,” he explained.

“In the long term, this will create uncertainties in the national economy,” he continued. “Vietnam’s textile and garment export would be entirely controlled by Chinese enterprises.”

An analyst said he agreed with Dung that the risk is very high. “Textile & garment is Vietnam’s key industry which makes products for export. If Chinese can control the industry, they would also control the other business fields such as agriculture and seafood,” he warned.

In fact, attracting foreign direct investment (FDI) from China remains an issue that raises controversy. Chinese FDI is not highly appreciated by Vietnamese experts who believe Chinese investors mostly bring outdated technologies to Vietnam which cause environmental pollution.

Thousands of workers have been brought from China to Formosa’s site, while Vietnamese workers were not hired.