Last week's anti-Chinese protests led to vandalism of Chinese and Taiwanese factories, causing casualties and property damage. But Vietnam could wind up the worst victim in the long run.
BEIJING — Last week's violent anti-Chinese rioting is the most serious that has occurred in Vietnam in 20 years. It was ostensibly triggered by protests against China"s oil exploration in the Paracel Islands, but in reality it may have represented organized violence.
Taiwanese businessman Tsai Wen-Rui, who has invested in Vietnam for 14 years, told the Taiwanese daily China Times that the Vietnamese are generally gentle people. In the past, strikes and protests were for specific appeals, but this time several attacks were organized simultaneously in different places within Binh Duong province. All of them more or less followed the same pattern, starting with masses gathering in front of factories.
The factories were forced to shut down, and the Vietnamese workers were allowed to go home first. Afterwards another batch of demonstrators arrived, scaring and intimidating management. Then came the mobs, the vandalism and the looting of anything valuable. Finally, the protesters set fire to the factories.
These incidents will have a significantly negative impact on Sino-Vietnam relations, on the Vietnamese economy, and on Vietnam's relations with neighboring countries. More specifically, they will represent a serious setback for Vietnam's investment environment because the vandalized foreign enterprises include companies from China, Taiwan, South Korea, Singapore and Japan, many of which are already considering retreating from Vietnam.
To avoid trouble, certain Taiwanese companies shut down their operations temporarily while others shifted their orders to Chinese factories. As some foreign executives have pointed out, if the Vietnamese government is incapable of getting the situation under control, acute withdrawal of foreign capital will be inevitable. By then, the results of Vietnam"s 28 years of reform and opening up will be destroyed in one fell swoop.
The Vietnamese economy is in serious danger after last week. Since Vietnam admitted in 1986 the failure of its planned economy and began taking drastic measures to reform and to introduce foreign capital and technology, economic development has thrived there. But the violence will strain economic and trade relations.
After all, the Vietnamese economy depends considerably on China. In 2013, Vietnam's imports from China totaled $37 billion and accounted for 28% of Vietnam's total imports. Its exports to China totaled $13.3 billion, accounting for 10% of its exports.
Besides, China's strategy within the Association of Southeastern Asian Nations (ASEAN) is bound to be affected. China's peripheral diplomacy depends on ASEAN countries. It wants to strengthen economic cooperation within the region to redeem its passive diplomatic approach of the past.
But the anti-Chinese violence will no doubt trigger China's to reassess this cooperation strategy. Negotiations of the Regional Comprehensive Economic Partnership (RCEP), a proposed free trade agreement between the 10 ASEAN member states, originally expected to be completed by 2015, will now face more obstacles. The same is true for the Free Trade Area of the Asia Pacific (FTAAP) negotiations.
The violence will probably also impact cross-strait relations. Some in Taiwan have criticized President Ma Ying-jeou's policies regarding the mainland, saying they are to blame for Taiwanese enterprises becoming targets. The Democratic Progressive Party, the island’s opposition party, also attacked the government's policy. This adds considerable uncertainty to the Taiwanese administration, especially on the heels of repeated public outcry against a free trade deal with the mainland and the forced halt of a nuclear plant project.
Vietnam's anti-Chinese violence has sounded an alarm to China. It is most likely to disrupt China's economic and trade strategies in the ASEAN countries, but may also undercut Vietnam's own development.
*He Jun is a senior researcher at Anbound, a Chinese think tank and consultancy.