Vietnamese manufacturers rely on Chinese materials and machinery

Manufacturers cite cheap prices when explaining why most of their machinery and equipment is made in China

Employees unload Chinese fabrics at Soai Kinh Lam market in Ho Chi Minh City December 10, 2013.

Minh Tien, a bag maker based in Ho Chi Minh City, produces some 35,000 handbags and backpacks per month, but more than 70 percent of the necessary materials have to be imported from China.

Its director Nguyen Tri Kien said the dependence on Chinese materials is inevitable because local suppliers are not able to provide new types and designs on a stable basis.

“[Local suppliers] rarely release new types while the Chinese materials can meet all of our requirements, so we have to switch to imports,” Kien explained.

While a number of Vietnamese wholesalers and traders prefer to source Chinese goods to distribute in the domestic market and rake in whopping profits, many of the country’s manufacturers also have a heavy reliance on raw materials and machinery from China for their production.

Vietnamese manufacturers, just like wholesalers who source Chinese goods mainly because of their throwaway prices, cite cheap prices when explaining why most of their machinery and equipment is made in China.

Businesses operating in the textile and garment industry, like Minh Tien, say they have resorted to use Chinese materials as those locally made fail to meet their standards in terms of type and design.

Kien admitted that the heavy reliance on Chinese materials pose several disadvantages for his production.

“We have to earmark a considerable sum for importing materials and storage, thus reducing the competitiveness of our products against the Chinese imported bags or backpacks,” he said.

In the apparel industry, the total import turnovers of Chinese fabric in the year to October have surged to US$3.15 billion, up by 28 percent from the same period last year, according to customs figures.

Similarly, footwear makers have to import nearly all of the necessary materials for their medium- and high-quality product segments.

“Imported material costs account for 60 percent of the export value of each pair of shoes,” a seasoned footwear expert told Tuoi Tre.

He also warned that should the Chinese suppliers cease contract or increase prices unexpectedly, local footwear manufacturers will be strongly affected.

Chinese machinery imported en masse

Vietnam has spent $5.28 billion on importing Chinese machinery in the first ten months of this year, an increase of $1 billion, or 23.26 percent, from a year earlier, according to data from the General Customs Department.

Most of the imported Chinese machines are new but they bear much lower prices than those from Japan or Germany, thus seen as a good choice from local businesses, according to customs agencies in HCMC.

The imports are machinery of all kinds, from assembly lines and office equipment to plastic-making machines and hydropower plant machinery.

And again, cheap prices are the main reason that many local manufacturers choose to equip most of their facilities with Chinese machinery.

“Chinese machines are not as good as similar machines made in South Korea or Japan, and they are also easily broken,” admitted N.H.K, director of a business that makes PE plastic bags.

K added however that he still bought Chinese machinery because “prices are 30 percent cheaper.”

“Should the machines break, I can still manage to cover the repair costs, but buying expensive machines from other countries is just beyond my ability,” he said.

Experts said Vietnam has repeatedly posted huge trade deficit to China because there are many sectors in which almost all machinery and technology have to be imported from China.

The technologies for the sugar, cement, steel, hydropower and thermal-power industries are mostly from China, they said.

To Quoc Tru, director of the Vietnam Energy Consultancy Center, said the total investment for a 1,200MW thermal-power plant using Chinese technology is only around $1.2 billion.

But the figure will be up to $1.7 billion with modern technology from a developed country of the G7 group.

That’s why many of the operational or constructing thermal-power facilities are using Chinese technology.

A former deputy minister of construction asserted with Tuoi Tre that even the toilet tiles at a thermal-power plant are imported from China. 

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