As Chinese Wages Rise, Hunt For Cheap Labor Lands In Vietnam

With the era of cheap Chinese labor over, international manufacturers such as Samsung, Canon and Foxconn have relocated major production plants across the southern border to Vietnam.

Delivering the goods in Hanoi (emilio labrador)
Delivering the goods in Hanoi (emilio labrador)
Pierre Tiessen

MONG CAI – The traffic rarely moves freely on the road which links the northern Vietnam city Mong Cai to Nanning, the capital of Guangxi province in southern China. Trucks rumble at high speed on this 150-kilometer-long stretch of road, which was repaved a few years ago. These trucks are carrying loads of clothes, shoes and bottom-of-the-range supplies destined to be sold in the region, but also in Guangdong, the neighboring province.

A local Chinese businessman explains: in Vietnam "everything is cheaper, since the workforce in China is getting more and more expensive." Across the border, he adds: "doing business is still worth it." China – the world's second-largest economic power – is no longer a manufacturing engine where blue-collar workers slaved away in factories in return for low wages.

In the southern Chinese city of Shenzhen, workers went on strike, picketing in front of the factory gates of foreign-owned companies. "But things have been getting better," says Qiang Li, founder of China Labor Watch (CLW), an American non-governmental organization. He estimates that in those factories, 85% of workers got a pay raise in 2010.

Qiang Li says pressure put on wages has had a "noticeable" impact: factory workers earn $141 a month, a 21 percent pay hike over one year. Still, Li thinks that "the working conditions are often unacceptable."

Rice fields paved over

More and more Chinese and international companies have been turning to southeast Asia, Vietnam in particular, in search of cheaper labor. In Vietnam, the minimum wage does not exceed $85 a month in the large manufacturing zones.

To witness this relocation trend, all you have to do is going to Bac Ninh, a city 40 kilometers north of Hanoi. A few years ago, there used to be large rice fields, but now they have been replaced by multinational companies and their local subcontractors.

Samsung's Bac-Ninh-based factory is its largest worldwide, employing 9,600 workers. Canon employs 8,500 workers, whereas Foxconn, a Taiwanese electronics manufacturer, employs 5,600. The latter is the world's largest maker of electronic components and the largest private company in China, employing 420,000 people.

"Vietnam has become a very competitive and dynamic country," says a media consultant working at Foxconn's headquarters. Since 2000, Vietnam has been experiencing rapid industrial growth, which has exceeded its GDP by 6 points on average. However, it is impossible to know the exact number of Chinese companies which have recently relocated their factories in Bac Ninh or in Ho Chi Minh City, Vietnam's largest economic region.

One thing is sure: long dormant trade and investment between China and Vietnam is suddenly starting to take off, says an European expatriate who is in charge of quality control in factories in the region around Hanoi. In January 2011, China invested several million dollars in two projects. The latter is currently the 8th largest investor in Vietnam.

Thanks to the China-ASEAN (Association of Southeast Asian Nations) free trade agreement, which was implemented in early 2010, Vietnam has increased exports to China by 49% over the past twelve months, even though the trade deficit with China was close to 9 billion euros in 2010.

The small and medium-sized Vietnamese businesses are those taking greatest advantage of this boom. In Dongxing, a Chinese city located near Mong Cai, large streamers are hailing the free trade agreement reached between China and Vietnam. They have announced the construction of Asean's largest cross-border market was finally finished. This 52-hectare-large site cost 200 million euros, and will soon allow for businesses and merchants to sell and/or buy all the products that Vietnam can produce at a low price.

Chinese companies are gaining an increasingly strong foothold in the Vietnamese market: the state-owned giant in the infrastructure and public works sector, the company CSGEC, has been building huge industrial complexes in Mong Cai. Many middlemen from Guangdong also have their own offices there.

The Renminbi, China's official currency, is used as a benchmark whereas the Dong, Vietnam's official currency, was devalued last Februar, the fourth time in the past fifteen months. Local observers warn that Vietnam is increasingly falling under China's sphere of influence. China is indeed Vietnam's top importer, as well as an important supplier with industrial equipments, electronic products, steel and oil products.

"Our local market is full of Chinese manufactured goods," says Vietnam News, the Vietnamese Daily, in 2011.

Vietnam is now trying to stop importing 15 000 kinds of products, including wine and certain manufactured goods. Local observers have noticed that the customs levied on some products have been on the rise. Finally, in early 2011, the Vietnamese government launched a public awareness campaign to encourage people to buy Vietnamese-made products.

Read the original story in French.

Photo - emilio labrador

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!

Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.

Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!