Will Vietnam’s Anti-China Riots Continue Disrupting Production?

industrial park
May 16, 2014 – Ho Chi Minh City, Vietnam

As anti-Chinese rioting in Vietnam escalated over the past week, production in many of the nation’s industrial parks was disrupted as factories were damaged and staff fled. The situation presents risks to factory owners, buyers, industrial park managers and other stakeholders, but the potential for long-term damage remains uncertain.

As of today, riots caused vandalism and production delays in several areas. Some of the first major incidents occurred in the southern provinces of Binh Duong and Dong Nai, where reports surfaced of large demonstrations and fires in several industrial parks. By mid-week, rioting also broke out at Vung Ang economic zone in Ha Tinh province. Many of the companies that sustained damage were Taiwanese firms that were mistaken for mainland Chinese companies.

As most people know by now, the riots began shortly after a Chinese company put an oil rig in waters contested between China and Vietnam. Yet reported facts from the riot sites and interpretations of the events remain inconsistent between sources. Questions remain about who’s inciting the riots and what their exact goals are. Unverified rumors, conspiracy theories and misinformation abound in Vietnamese and international media.

Whatever the exact causes and impacts, the situation raises concerns for factory owners, buyers, industrial park managers and many other stakeholders in the country’s multi-billion dollar production sector. Not only does this disrupt current operations, it also deters future investors from setting up shop.

Given the potential impact, how long will this last?

At present, nobody knows for sure exactly how the situation will unfold, but BDG sees three possible scenarios:

(1) Production Returns Quickly to Normal

– If the riots fizzle and lose momentum, production should return to normal in most industrial parks within one week. Right now, security and tensions are high, but if no major incidents happen after a few days, workers and managers can be called back to most plants. Sites that sustained minor damage might take a few extra days to clean up; those that were burned might not be live for weeks or months.

(2) Further Incidents Cause Riots to Continue or Escalate

If more violence in Vietnam or further provocations from either country cause the tensions to increase, production delays might last for 2-4 weeks. If the riots are small and contained, delays will be minimal; if more large-scale riots occur, the delays will be longer.

(3) Major Political or Military Conflicts Erupt and Cause Indefinite Delays

In the possible but unlikely scenario that the tensions erupt into more serious conflicts that include major sanctions, sustained riots and/or military confrontation, production may be delayed indefinitely.

BDG believes that scenarios #2 and #3 are likely if another major incident occurs that stirs public opinion in a negative way. If more Chinese are killed or wounded, for instance, more Chinese citizens may flee the country and minor sanctions might be enacted by either China or Vietnam. The same might be true if people are killed at sea in the conflicts. BDG has heard rumors of conspiracies by various third-party interest groups to incite violence for political or economic gain. If these rumors are true, such incidents will give them material to stir unrest.

Industrial park operators and tenants must remain cautious, but should take comfort in the fact that it’s difficult to sustain riots in industrial parks. As large, spread-out places, they require rioters to have a high level of motivation and aggression to inflict damage outside of small, contained areas. Moving large crowds through these parks over long periods of time will require transportation, food and other facilities that are not readily available. Especially now in the hot season, it’s simply too hot during the daytime to be outside for any extended period of time.

Given the risk, however, BDG is continually monitoring these events, making site visits when necessary. Being based in Vietnam, we are helping our clients and other interested parties stay on top of the situation and ensure that they have accurate information. Feel free to contact us if you need help tracking the situation or want to share knowledge about what’s happening.