Vietnam still counting the cost of China tension

HO CHI MINH CITY – The drowsy security guards and humming machinery at the Vietnam Singapore Industrial Park suggest it's business as usual at this enclave of foreign investment outside Ho Chi Minh City, six months after anti-China riots left hundreds of factories in ruins and their managers cowering in fright.

Memories remain fresh, however, of the violence that plunged relations between the communist neighbours to their lowest point in decades and damaged Vietnam's claims as a safe place to do business.

“I was a bit scared,” an infrastructure manager told China Spectator on a recent visit to VSIP, recalling the thousands of rioters who tore through the complex's usually sleepy avenues, torching workshops and looting with impunity.

“It was political, and it happened too quick for anyone to control.”

The March 13-14 riots at VSIP, one of a number of industrial parks attacked by protesters across the country, followed days of mass protests in the wake of China's decision to station a huge oil rig at the Paracels, a group of South China Sea islands and reefs claimed by both countries and Taiwan.

The oil rig, however, was merely the trigger for a wide range of anti-China grievances to find expression in a shocking bout of violence that killed at least four people, stunned Vietnam's foreign investor community and led to the evacuations of thousands of Chinese nationals.

The victims, ironically, were mostly Taiwanese firms, with investors from Hong Kong and South Korea also swept up in the turmoil.

Six months later, China-Vietnam relations have thawed, with a drawn-out and highly choreographed diplomacy made possible by the oilrig's departure to Chinese waters in July. Spooked investors have been paid off with tax breaks and other benefits. Many of the torched workshops at the industrial parks have been rebuilt.

At VSIP, lorries and motorcycle-riding workers zipped in and out of the park with impunity, breezing past check-points where security guards lolled on chairs, smoking cigarettes and playing cards.

On the ground, however, a sense of wariness lingers.

No Chinese or Taiwanese flags were hoisted outside their firms' factories, though the flags of virtually every other investing nation fluttered alongside the host country's at the gates of their plants.

The Chinese name of one Taiwanese manufacturer was blacked out at the entrance to its estate, a reminder of the desperate efforts by factory bosses to protect their assets from rampaging vandals.

No further demonstrations at VSIP have been recorded, peaceful or otherwise, but the park's tenants remain careful to distinguish their businesses from their Chinese counterparts.

“We were told to be pretty clear about where we're from,” a quality manager at an American manufacturer said as he took a cigarette break outside the firm's factory gate.

Fears that the oil rig crisis might spark an exodus of foreign investment have proved overblown, underscored this week with the announcement that Samsung will invest $3 billion in a plant to produce smartphones in the country's north, adding to a $2 billion plant opened in the same province in March.

But pain is still evident in Vietnam's tourism hot-spots where the number of Chinese visitors fell sharply after their government issued a travel warning to the country during the unrest. The numbers have yet to recover.

Hotel executives complain of thousands of cancelled nights at beach resorts between the central coastal city of Da Nang and the World Heritage-listed Hoi An to the south.

“It's not possibly related to the anti-China riots, it's undoubtedly related,” said a senior marketing manager at a high-profile five-star property near Da Nang.

China is far and away the biggest contributor of inbound tourists to Vietnam, but the number of estimated arrivals for October were down nearly 19 per cent year-on-year, according to Vietnam government statistics.

“Because China's the main rapid growth market (for tourism), the impact has been enormous,” said Brian King, a South East Asia tourism expert and professor at Hong Kong Polytechnic University.

“Probably the worst is over, but other incidents can knock it off course again.”

Restoring good faith between the communist neighbours' peoples may also prove elusive, with anti-China sentiment still rife among Vietnamese students, intellectuals and sections of the media.

“These groups are just waiting for China to do something stupid in their view, or aggressive and it will all start again,” said Carl Thayer, Emeritus Professor at the University of New South Wales.

China and Vietnam share authoritarian political systems grounded in the same ideology, but the countries have never been warm friends. China invaded Vietnam in a brief but bloody border war in 1979 before withdrawing. Both sides claimed victory.

The countries clashed again over the Spratlys in 1988, another disputed chain of islands and reefs in the South China Sea, which may contain significant oil and gas deposits and has rich fishing stocks.

In recent years, China's more assertive stance to its claims – which extend to about 90 per cent of the South China Sea – has enraged Vietnamese nationalists already chafing at their country's growing economic dependence on its more powerful neighbour.

China's actions have not only won it few friends in the region but also alarmed the United States, which branded the oilrig move as “provocative”.

As hosts of the Asia Pacific Economic Cooperation summit, China has made the right noises this week about solving maritime disputes with its neighbours through dialogue.

The proclamations are unlikely to comfort many Vietnamese who believe the oil rig will return after the typhoon season finishes in November and trigger another round of violence.

“The Vietnamese people are closely watching what China is doing now,” said the infrastructure manager, who requested anonymity.

“It all depends on what China does next.”

Though China hauled away the rig claiming its mission was accomplished, the severe backlash against it may have given the country's Communist Party leadership pause for thought, experts suggested.

Vietnam's outgunned fleet of coast guard vessels could do little to dislodge the HD-981 rig, protected as it was by a more powerful ring of Chinese ships, but the country won the public relations battle and gained sympathetic media coverage for a tenacious, if fruitless, stand against the continent's dominant power.

Even as both countries' leaders have moved to re-set relations in recent weeks, Vietnam has bolstered defence and energy ties with India, which announced on Oct. 28 it would extend a $100 million line of credit to the Southeast Asian nation for military purchases and will soon supply it with naval vessels.

That followed the United States's decision to partially lift a long-time ban on lethal weapon sales to Vietnam to help it boost maritime security.

The idea of Vietnam moving closer to two greater economic and military powers would be unedifying to the Chinese, who could well launch a charm offensive with their neighbour, experts said.

Vietnam, knowing the commercial stakes in its relationship with China, its fourth largest trading partner and main supplier of raw materials for industry, is likely to be receptive, according to Thayer.

That could at least mean some “quiet” in the South China Sea over the next six months, he said.

“It won't fix the irreconcilable claims to sovereignty, particularly over the Paracel islands and their waters, but it may lead to better management of those issues.”