What can the US-China trade war bring to Vietnam’s plastics industry?

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“We are very busy now receiving business delegations from many countries, especially from Europe and the US. They are shifting orders from China to Vietnam,” said Ho Duc Lam, chair of Rang Dong Plastics and the Vietnam Plastics Association.

Lam can see the influence of the US-China trade war on Vietnam’s enterprises, though statistics still d not show this.

“The impact will be clearer in two years because it’ll take time for any policy to show its influence,” he said.

He explained that previously multinational companies such as Walmart and IKEA had to outsource products overseas to provide their retail chains, mostly placing orders with Chinese enterprises. But they now tend to shift orders to Vietnam as they think the trade war will last a long time.

However, Lam said not many Vietnamese enterprises can satisfy the quality requirements of foreign importers.

“Vietnam’s enterprises still have not prepared for this,” he said. “The opportunities are great, but we have to prepare well to grab them.”

The preparation that Lam mentioned includes improved corporate governance, technology renovation and product improvement, because foreign partners set very high technical requirements, from design to trimming. 

Another challenge for Vietnam’s plastics industry, according to Lam, is the possibility that Chinese enterprises may try to increase exports to Vietnam, or ‘borrow’ Vietnamese enterprises’ names to export products to the US to avoid tax.

A Ministry of Industry and Trade (MOIT) official, confirming the risk, explained that as Chinese exports to the US become more expensive because of heavy taxes, Chinese enterprises will try to export products to other markets instead of the US. One of the alternative destinations is Vietnam.

Lam cited foreign press as saying that Chinese Guangxi provincial officials are considering setting up cross-border trade zones, where Chinese enterprises can make products for export to the US as Vietnamese products.

The production mode, in fact, has existed for years. However, Lam fears the situation will be serious when it is organized methodically by local authorities.

“They may not bring the entire production lines to Vietnam, but they will only bring the last phase, or one third of production lines,” Lam warned, adding that this would be a big challenge for Vietnamese enterprises.

Meanwhile, 70 percent of plastics enterprises are small and medium sized with weak competitiveness.

Tran Dinh Thien, a respected economist, while predicting that FDI will flow to Vietnam, warned that making money is never an easy job.

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