Cheap Chinese products drive Vietnamese out of commodity segment

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A souvenir booth sells all Chinese products in Sa Pa resort town in northern highlands. Photo by Nguyen Nga

Many imports from China - which was once again Vietnam's biggest import market in 2013 with US$23.7 billion in revenues - are beating out local products thanks to cheap prices.

Local producers said the problematic rising trade deficit with China has been hitting them hard, as poor-quality cheap Chinese products are dominating the market in all segments, starting with toothpicks.

Nguyen Van Ha, director of the Binh Minh Toothpick Unit in Hanoi, said more than 1,100 tons of toothpicks were imported from China a year from at least 2010, at half the prices of local ones.

He said his products used to dominate the market until the Chinese wave.

The unit once ran four factories, exported 18 40 tons a month and produced thousands of tons for the local market, but it has all been narrowed down to one factory with a workforce thinned out from 274 to 35 workers.

Ha said the company could not export a single toothpick in 2013 as the material supply was not stable because it had been scooped up by Chinese producers.

"There were orders from Malaysia, India and East Europe, but we had to turn them down."

He said every 6.5 kilograms of bamboo can make one kilogram of toothpicks.

He called it a paradox as Vietnam is selling thousands of tons of bamboo to China a year in exchange for toothpicks.

Several producers of bamboo products said loose government management has enabled a robust export of bamboo to China, causing material shortages at home.

They said it's hard to find enough material to meet local demands, let alone exports.

Industry insiders said China has been able to offer low prices thanks to labor and materials available at dirt cheap prices, the economy of scale, and government policies that keep the dollar-Yuan rate stable and provide VAT refunds to exporters.

They said Chinese producers are even willing to sell at prices cheaper than cost to dominate or destroy a market, and that strategy is supported by their government.

Vendors in Ho Chi Minh City said they have been selling Chinese products at the same prices for many years, while the same products from Vietnam keep increasing in price and do not look as good.

Sau Phuong, who sells lucky money envelopes for the Lunar New Year festival, said a Chinese sample has remained at VND4,000-5,000 a pack for five years now, but similar or worse Vietnamese samples are twice or three times more expensive.

"Vietnamese products are very hard to sell,"he said.

Danny Dang, a Viet Kieu businessman, used to export fish sauce and dried fish to the US, but since it hit crisis and orders died out, he has switched to importing Chinese products to sell in Vietnam.

"It was unexpected, but that solution has kept us alive for three years now."

His company imports kitchenware like cleaning pads, pot pads, knives and they sell like hot cakes in Vietnam thanks to cheap prices.

"Sometimes I feel bad for Vietnamese businesses. But if we buy Vietnamese products at high prices, we cannot make profit and we'd die."

Chinese in disguise

Imports from the northern neighbor also dominate many trade fairs in the shopping hub Ho Chi Minh City, even when they were designated as "Vietnamese products fairs," like at the shopping week ending January 3 in Binh Thanh District.

Some stalls charged VND10,000 (less than half a dollar) for every three items among a wide range of commodities like hair clips, toothbrushes, nail polish, shavers, key chains, combs, pot pads, or pens.

Other stalls further inside offered similar pieces for VND2,000 each, and clothes with all Chinese labels for VND12,000 a piece.

A vendor named Tuan said consumers are uncomfortable with the idea of buying Chinese products, given news about how toxic and poor quality many of them were, so he has to lie and add the Vietnamese labels to boost sales.

"The truth is all footwear and clothes here are Chinese."

Similar products were common at recent trade fairs around the city, including several in the city center.

Nguyen Van Khang, vice chairman of Phu Nhuan District and a member in the management board of trade fairs in the district, said Chinese products are in every fair because that's the only way the events could serve low-income people.

"Trade fairs mostly serve poor people and thus the cheap products are meant for them," Khang said.

He said that although contracts with the organizing company and participating businesses require the products to be made in Vietnam, "it's hard to stop them" from bringing in Chinese goods.

Part of the district's revenues from the fairs will be used to give around 200 gift packages worth VND300,000 each to poor children in the area as New Year gifts, he said.

Huynh Van Minh, chairman of Ho Chi Minh City Business Association, disagreed with the argument, saying that Vietnamese businesses need to clear their stocks at the year end and would be willing to sell at low rates as well.

Minh said that by allowing trade fairs to sell Chinese products in disguise, the city authorities have helped earn local products a bad name and customers will stop coming around once they know they are being cheated.

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