Vietnam's economic crisis Hong Kong and Taiwan textile enterprises move to East Asian countries

by:JIYALI     2021-08-18
Due to the rapid economic growth in China, labor-intensive companies in the Pearl River Delta have moved to Vietnam in the past year in search of lower labor costs. However, in the recent months of severe inflation, currency devaluation, and the resulting strikes, Hong Kong and Taiwan companies investing in Vietnam felt pressured and had to lay off staff and reduce production. At the same time, they turned their eyes to Indonesia, India, Cambodia and other countries. Transfer production location.   Vietnam was originally the preferred investment location for labor-intensive industries such as textile services and footwear. However, Hong Kong's 'Wen Wei Po' reported that the Vietnamese stock market has fallen by nearly 60% this year, the Vietnamese dong has depreciated against the US dollar by 27%, and the inflation in May has exceeded 25%. The currency depreciation caused by inflation has caused conflicts between labor and capital in enterprises, and the investment environment in Vietnam no longer meets the original cost-saving considerations of Hong Kong and Taiwan enterprises.   Chen Yanhong, general manager of Zhongshan Taiwanese Yongsheng Garment, told the media that due to severe inflation, the salary of employees in the Vietnam branch has risen sharply from US$80 a month a year ago to US$120-150 now. Due to rising costs, the company's Vietnam development plan had to be slowed down, and part of the output of the Vietnam branch was moved to other branches. In order to reduce risks, the Vietnam branch has reduced its production capacity by 30-40%, of which 2/3 is transferred back to the Pearl River Delta production, and the rest is allocated to the Indonesian branch.   Unlike many strikes and labor disputes in other industries, Yongsheng takes care of its employees with a salary increase and a monthly distribution of 20 kilograms of rice. However, Chen Yanhong said, 'Many people in the industry predict that there will be a more serious economic crisis in July this year. Now Chinese companies in Vietnam are panicking.'    In the past two years, operating costs in the Pearl River Delta region have been rising, causing Taiwanese companies to move out of production lines. shift. According to Zhai Suo, Executive Vice President of Dongguan Taiwanese Investment Association, among the more than 6,000 Taiwanese companies in Dongguan, 20% of them have moved or transferred their production lines. And the report pointed out that the survey showed that more than 200 textile companies have invested in Vietnam from China.   But in the past year, the warning 'Need to be cautious in investing in Vietnam' has generally appeared in the Hong Kong and Taiwan Chamber of Commerce, and there are many news that Hong Kong and Vietnamese investors have brought back are not optimistic. These include the lack of sufficient labor as expected, especially the experienced labor less than the Pearl River Delta; and the unstable financial environment in Vietnam, which can be explained by the current economic crisis.  As a result, many Hong Kong and Taiwan companies have shelved their original plans to advance to Vietnam, and even some companies that are moving their production lines to Vietnam have stopped the transfer of production lines. Lim Guangde, chairman of the sub-group of the Federation of Hong Kong Industries, said that in the past, many members were very interested in investing in Vietnam, and the conditions for the Vietnamese authorities to attract investment were more favorable than in the past; but this just proved that the Vietnamese government’s eagerness to attract foreign investment is due to the country’s domestic investment. The economic situation is poor. However, none of the Hong Kong businessmen who visited Vietnam with great interest three months ago really invested in Vietnam.  In contrast, Indonesia, India, and Cambodia, where labor costs are still low and favorable investment conditions, have become alternative investment locations for these Hong Kong and Taiwan companies. Many Hong Kong companies hope to visit Cambodia, because Cambodia’s labor costs are still low, and they want to learn more about their investment environment. Some companies have already planned to transfer their production lines to Indonesia and India.   For example, Dongguan Taiwanese company Baihe 9938 (TW), which specializes in producing hook-and-loop fasteners for sportswear companies Adidas and Nike, said that investing in Vietnam is mainly to follow the policy deployment of big brands. Because companies such as Adidas and Nike have set up factories in Vietnam, the company has also set up branches in Vietnam.   Pak Ho's Associate Zheng Xitong said that Pak Ho's Vietnam factory still has sufficient orders and its production efficiency is higher than other domestic manufacturers in Vietnam. However, Vietnam's economic crisis still makes them more vigilant and have to be more cautious about investment. The company has no plans to expand in Vietnam, but it has planned to build a new plant in Indonesia on an area of u200bu200b100,000 square meters, and intends to transfer part of its production lines in Vietnam.   The executive vice chairman of the Dongguan Taiwanese Investment Association, Zhai Suoling, said that India may be the next location for Taiwanese investment. Because India has a large population, there is no need to worry about labor shortages. Moreover, if processing trade companies are not popular in India, its vast domestic demand market is still worth operating.
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