China and Hong Kong Increase Investment in Vietnam

June 16, 2014 Posted by Vietnam Briefing Reading Time: 4 minutes

HANOI – Vietnam’s Department of Foreign Investment (DFI) has reported that, in the first five months of this year, the country saw a steep rise in foreign direct investment (FDI) capital from Hong Kong and China.

Thirty-eight countries and territories invested in Vietnam between January and May. Hong Kong contributed US$630 million in newly registered FDI, making them the second largest investor into Vietnam, and accounting for 11.5 percent of total investment into the country. Hong Kong’s FDI was a fourfold increase over its investment during the same period last year.

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China ranks as the seventh largest foreign investor during the same period, with a total investment of US$300 million – a threefold increase year on year.

Made in Vietnam

According to the DFI, investment into the textiles and garment industry rose for the first time since mid-2012, with large-scale projects seeing investment from businesses located in China, Hong Kong and Taiwan.

An example of a key foreign investment can be seen in the decision of the Economic Zone Management Board of Long An province to grant an investment certificate for Hong Kong’s Huafu Company Ltd. to invest US$136 million in a textile and dying plant. This project is expected to break ground next year. The plant will occupy 20 hectares and manufacture 300,000 tons of fiber and dye 20,000 tons of cotton annually.

Additionally, there are a number of Chinese and Hong Kong textile and garment companies already present in Vietnam who have announced plans to expand their businesses and investments.

The Trans-Pacific Partnership (TPP) is also spurring the growth in investments for the textile industry. Out of the 12 countries negotiating the deal, Vietnam is predicted to benefit the most due to a clause that would cut tariffs on textiles and apparel, which are among the nation’s top exports.

To take advantage of the forthcoming tax reductions, foreign companies are shifting their factories to Vietnam. Chinese investors are boosting their investment in Vietnam because they want tariff-free access to the United States. Additionally, Vietnam boasts cheap abundant labor and is improving its ease of doing business.

Building Vietnam

Besides the textile and garment industry, China and Hong Kong investors have also increased their level of investment in Vietnam’s real estate market.

Vietnam was recently names by U.S.-based Association of Foreign Investors in Real Estate as the fourth emerging marketing in the world for property investments. A proposed law to allow foreign ownership of real estate is carefully being studied by the Vietnamese government in order to further boost the local property market.

Two key investment projects are the US$200 million apartment building project in Binh Thanh District in HCMC by the Hong Kong-based Sunwah Group, and China’s Texhong Group’s US$215 million project to develop infrastructure in Quang Ning province’s 660-hectare Hai Ha Industrial Park.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

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