(www.chinapaperonline.com) To avoid rising labor cost and effects from trade tension between China and USA, some Chinese manufacturers have relocated their production facilities to neighboring Vietnam. However, a few are now concerned of their rashness and one had to abandon his entity within a year at the investment loss of nearly US$730,000, according to news reports!
Chinese manufacturers, especially those in Dongguan, Southern China, were first attracted by low construction and labor costs in Vietnam than their home towns in China. Also, products labelled as “made-in-Vietnam” appear easy to export to North America and Europe. However, there is a hard distance from prospect to reality. A shoe manufacturer formerly in Dongguan, Southern China, for example, moved his factory to Vietnam in May 2017, installing 4 production lines and hiring 100 local people. Very soon, he encountered the lack of skilled workers. Also, reluctance to work overtime by local people posted another day-to-day challenge. As not all Chinese investors have time or can afford to train the local people to levels competent to their counterparts in China, this may likely get into a difficult situation for some to either relocate to a third country or to return to China.
Market analysts recalled, however, when foreign investors first came to China in the mid-80s, they experienced similar pains in the process of building their business from scratch to a rewarding one. There were a number of failure stories as a result of cultural and administrative differences and even originated from such trivialities as morning exercises and after-lunch naps! As more investors are now better prepared and ready to spend time and resources to integrate their practices with local culture, it is believed that more Chinese investors will eventually set down in Vietnam and other parts of Asia than those retreating and their business will eventually become cost-effective and competitive in the global market. Lee&man may serve as a good example. Being one of the pioneers and now a consistent local producer, the company began construction of its mill in Vietnam in 2007. Since then, it has grown into a 550,000/mtpy containerboard production complex, equipped with a 125 megawatt power plant, a 20,000/tpd waste water treatment facility and 3 three berths at the capacity of 10,000/tonnes each. To build on its growing presence as a multi-national company, Lee&man announced in October 2018 to invest HK$5.1 billion in Malaysia. The new mill, to be constructed in Sepang Malaysia, will produce 700,000/mtpy of containerboard and 550,000/ mtpy of recycled pulp when in full commercial operation.