New Investment Wave of Chinese Enterprises Through M&A

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Chinese investors are promoting activities such as invest and set up business in Vietnam. In particular, they are increasing their presence in Vietnam through M&A activities, especially in the real estate sector.

Sharing with Chinese businesses attending the recent conference about opportunities to invest in Vietnam, Mr Chen De Hai – Consulate General of China in Ho Chi Minh City said that since 2016 until now, the investment capital of Chinese enterprises into Vietnam increased sharply, production capacity is expanding, and the number of large investment projects are increasing.

No specific information on where these projects are invested, but Mr. Chen De Hai said that the investment portfolio is quite diversified and the investment capital of many projects is not small. There are projects ranging from several hundred million to more than 2 billion USD and investment in areas such as thermal power, wind power, solar cell production, textiles, tire production…

According to data from the Foreign Investment Agency (Ministry of Planning and Investment), in 2017, China’s committed investment capital ranks 4th among countries and territories investing in Vietnam. This is a very new development because in the past few years, China has rarely been in the top 5 foreign investors with large amount of investment capital into Vietnam.

2017 also recorded many M&A transactions of Chinese enterprises with partners in Vietnam in the field of real estate.

However, there are indications showing that not only investment through M&A and focus only on real estate, but Chinese enterprises will increase investment in manufacturing in Vietnam.

It is known that the investment activities of enterprises in the field of textile, fiber and leather footwear are in the roadmap to adjust the industry policy of China and are encouraged to invest abroad.

Meanwhile, Chinese businesses want to invest in Vietnam to take advantage of tax incentives when exporting to the US market or European countries because Vietnam has signed many free trade agreements with these countries.

A demonstration of this move is that the Bank of China – Ho Chi Minh City Branch, and Shenzhen Securities Information Co., Ltd (under Shenzhen Stock Exchange) in December 2017 has signed a contract in order to promote the attraction of Chinese investment capital into Vietnam.

According to many analysts, China’s new wave of investment in such manufacturing sectors as steel, textiles, fiber, furniture…, is a story that can happen in the near future.

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Vietnam Asks State-Owned Firms to Sell Foreign Currencies

Jun 02th, 2011, from The Wall Street Journal. HANOI—The State Bank of Vietnam has asked all state-owned firms to sell their foreign currency to banks beginning July 1, part of a plan outlined in February to eliminate the use of foreign money in the domestic market.

The central bank announced the directive Wednesday in a statement on its website. It didn’t provide details on the amount of foreign currency state-owned firms are believed to hold.

The central bank also asked banks to raise their reserve ratio for foreign-currency deposits maturing in less than 12 months to 7%, from 6%. This will raise banks’ costs to absorb dollar deposits and should eventually force them to offer lower interest rates on such deposits, discouraging the public from holding dollars.

Hanoi-based bankers said the latest steps are in line with government efforts to boost the value of the local currency, the dong, and build Vietnam’s foreign-exchange reserves. On Thursday the central bank capped the interest rate offered on individuals’ dollar deposits at 2%—down from the 3% limit set in March—and lowered the cap for corporate accounts to 0.5% from 1%.

These steps come after the dong has lost more than 15% of its value against the U.S. dollar over the past two years. The central bank has devalued the currency four times but still has failed to stop the bleeding.

“Though the government has introduced various measures to control imports, monthly trade deficits have been rising fast so far this year, making the authorities come out with new steps to support the dong’s value and improve foreign reserves,” one executive at a commercial bank said.

According to Nguyen Hai Ha, an analyst with MBCapital, one of Vietnam’s largest fund management groups, the steps will help the central bank meet short-term targets on the reserves and the exchange rate.

In the long run, however, “the dollar is expected to rise because local reserves of the U.S. currency are thin, while trade deficits continue to rise,” the analyst said.

The central bank said companies will be able to buy back dollars later if they need them.

Vietnam’s trade deficit widened to $1.7 billion in May from $1.49 billion in April, its largest monthly deficit since December 2009, government figures showed.

The country’s trade deficit during the January-May period was $6.59 billion, compared with $5.46 billion deficit a year earlier.

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