China as a major world player in investments inwards and outwards

China became the second worldwide biggest recipient of FDI behind the United States since 1993. By the year 1996, the investments that China had taken outwards were valued over $18 billion, following Hong Kong, with $112 billion –before they joined the Mainland-, Singapore with $37 billion and Taiwan with $27 billion. As its power rapidly expanded throughout the years, the participation of China in the regional and global economy, through both inward and outward FDI as well as in trade, became more transcendent the international political economy⁶⁹.

By 2013, China accumulated investments over USD 870.400 million all around the world, getting involved in different sectors, including energy, transport, metals, real estate, finances, agriculture and technology. By 2015, China had already surpassed the U.S. as top destination for foreign direct investment. Foreign firms invested $128 billion in China, while only $86 billion were taken into the U.S., according to UNCTAD, mostly on services sectors, rather than manufacture, as it might be thought, in times where the global economy do not move around so much after the financial crisis⁷⁰. At the same time, and after its spectacular economic growth, China also became an important investor beyond its borders, since is the largest outward investors from the developing countries, even before being one of the largest economic powers.

68 MOFCOM, List of China's Qualified Overseas Contractors, in

http://wszw.hzs.mofcom.gov.cn/fecp/zsma/corp/corp_ml_list_en.jsp [consulted on June 20, 2016]

69 CAI Kevin, “Outward Foreign Direct Investment: A Novel Dimension of China's Integration into the Regional and Global Economy”, in The China Quarterly, Volume 160, December 1999, p. 856

70 “China overtakes US for foreign direct investment”, BBC News Online – Business, in http://www.bbc.com/news/business-31052566 [consulted on March 26 2016].

33 Investments in Vietnam among 2005 and 2013 reached the USD 11000 million⁷¹. The growth in the net overseas investments to its neighbor country since 2005 has been consistent, with a slight turndown in both 2011 and 2014, to achieve a spectacular rise in the last years⁷², taking note that the first years these are not related to financial investments and that the decrease in 2014 might have occurred due to the events in May that year.

Figure 2

Main economic sectors China invests in Vietnam are mining, processing and manufacturing and construction. There are fewer projects in agriculture, forestry, fisheries, and high-tech industry, represents about 3.8 of total Chinese ODI in the country. Most of these projects are of small-scale, owned by small and medium enterprises, and are located all around the country, with

71 Data source: World Bank. In “Inversiones Chinas en el Mundo”, El Financiero, 14 Nov. 2014.

72 CHINA STATISTICAL YEARBOOK (different years from 2005-2015), in

http://www.stats.gov.cn/tjsj/ndsj/2015/indexeh.htm [consulted in November 2015 and June 2016]

34 special concentration in the northern border and in Ho Chi Minh City, which gathers majority of Chinese ethnic population. Of these projects, the type that causes bigger flow of Mainland workers are the construction projects, from expert engineers and managers, technicians in diverse areas to blue-collar workers with basic skills⁷³.

The monthly average wage in year 2000 for urban China was 9333 yuan, -that is, to USD exchange rate of today, around 1400 USD-. In the same period of time, year 1999, the average wage for the average for the whole country in Vietnam was 295 USD. By year 2010, the average wage in urban China was 36539 yuan –around 5400 USD-, whereas the wage for Vietnam was 1387 USD⁷⁴. When it comes to unemployment comparison, while between 1997 and 1998, Vietnam had around 4.5% of unemployment, China was below 3.0%. By year 2012, Vietnam unemployment rate dropped to around 1.5%, and in China stayed in around 4.0%.⁷⁵

Figure 3: China vs. Vietnam Unemployment Rate (ADB)

73 NGUYEN Van Chinh, “Recent Migration to Vietnam” (2013), Asian and Pacific Migration Journal, Vol. 22, No. 1, Pp. 11-12

74 Data source: China Statistical Yearbook 2015, and General Statistics of Vietnam.

75 Data source: Asian Development Bank

35 4.5. The problems with the outwards investments policy: example Africa

Africa seem to be in the eye for Chinese foreign policy, as it is the first economic power that has given special attention to this continent⁷⁶, promulgated many policies on foreign aid, funding, special credits, cooperation agreements and other sets of policies⁷⁷. The main interests of China in Africa is seeking for natural resources –especially oil- and see it as a potential market⁷⁸, while not interfering in internal political issues⁷⁹. In figures, by the end of 2014, Chinese overseas investments in Africa reached 32.350 million USD, being South Africa, Nigeria, Algeria and Sudan among its largest partners⁸⁰

Africa and China started its partnership with the Forum on China-Africa Cooperation in year 2000, in which both parts agreed a three-year plan to increase Sino-African trade and investments and cancelled the debts of African countries to their Asian partner, whereas Chinese enterprises were encouraged to invest in this region⁸¹. Then is when the African chapter of

“Going global” began.

However, as well as helping to construct needed facilities and bringing technological advances to this region, there are also reported cases of “poor labor measures” ⁸² by Chinese companies and

76 ZHU Zhiqun, (2010) China’s New Diplomacy: rationale, strategies and significance, Ashgate Publishing Limited, UK, p. 36.

77 Browsing around the official websites of China: MOFCOM, Gov.Cn, Invest in China, there are plenty of documents destined to outline policies towards Africa. http://english.mofcom.gov.cn/,

http://www.gov.cn/english/special/115y_index.htm, http://www.fdi.gov.cn/

78 China and Africa: A Century of Engagement by David H. Shinn; Joshua Eisenman. Review by: Roselyn Hsueh in The China Journal, No. 73 (January 2015), pp. 294, 295

79 VOSS, Hinrich, The determinants of Chinese Outwards Direct Investment, op. cit, Pp.80-81

80 CHINA STATISTICAL YEARBOOK 2015, http://www.stats.gov.cn/tjsj/ndsj/2015/indexeh.htm [consulted in June 2016].

81 CHINA AFRICA FORUM, “FOCAC: trade, investments and aid in China-Africa relations”, May 2012, Policy Briefing, Center for Chinese Studies, Universiteit Stellenbosch South Africa, in

http://www.ccs.org.za/wp-content/uploads/2012/05/FOCAC_Policy-Briefing_tradeinvest_final.pdf [consulted on August 16 2016].

82 KURLANTZICK Joshua (2007) Charm Offensive, Yale University: Caravan Books, P. XIII.

36 hiring of numerous Chinese workers in plants and factories in several African countries, upsetting the local workforce, who expected to be employed by these flows of investments:

-In Kenya, a Chinese company is meant to build a railway from Mombasa to Nairobi, to later connect the rest of East Africa. The locals protested after finding out the promised jobs were not given, blaming on the import of their own labor, and being paid even half of the expected wage, from 500 shillings to 250 actually paid. 14 Chinese workers were attacked in the unrest⁸³.

-The World Bank estimated that 48% of Ghanaian youth is unemployed. When youngsters asking why these companies in charge of building construction projects in Ghana is full of Chinese workers and do not hire locals, the answer by both government and companies is that

“these are not job programs” and that “it is just pure business”, and Chinese companies often win the bid of these projects by cutting up to 50% costs of construction⁸⁴.

-Talking about Africa-China relations in general, an economist from the International Monetary Fund Wenjie Chen explained this reason: “It’s a myth that no Africans get to work on these projects…. The reason the Chinese go there is because of cheap labor, since labor costs in China itself are rising.”⁸⁵

-In Chinese-run copper mines in Zambia exists grass-root resentment over low wages, unsafe working conditions and poor environmental practices, resulting in riots and shootings that have

83 “Kenyan rail workers are protesting against their Chinese employer for a raise—to $5 a day”, in Quartz Africa, http://qz.com/749177/kenyan-rail-workers-are-protesting-against-their-chinese-employer-for-a-raise-to-5-a-day/

[consulted on August 18 2016]

84 “Ghana Resident: Why Does China Send Workers To Africa When So Many Here Are Unemployed?” in The Huffington Post, http://www.huffingtonpost.com/entry/china-workers-africa_us_57ad51ace4b071840410bb60 [consulted on August 18 2016]

85 “China’s Investments in Africa: what’s the real story?”, Jan 19 2016, University of Pennsylvania Wharton, at http://knowledge.wharton.upenn.edu/article/chinas-investments-in-africa-whats-the-real-story/ [consulted on August 18 2016]

37 killed at least 46 workers of the mines, and even Trade Unions have pronounced against China’s control of the economy of Zambia, exploiting an anti-Chinese sentiment all over the country⁸⁶. -Chinese enterprise CITIC Construction Co was building a big reconstruction project in Angola, called KK City, which in its first phase was financed by Sonangol, Angola Oil Company. This massive project included the construction of a railway that connected up to Mozambique. Locals there complained about the arrival of thousands of Chinese workers, as well as other practices like miscommunication with employers and other workers⁸⁷.

In the next part, it will be seen the specific problems occurring with the arrival of Chinese outward investments to Vietnam, framed in a very complex historical relationship, that causes constant tensions and feelings of distrust between the two neighbor nations.

86 ZHU, Zhiqun, 2010, Op. Cit. P. 47.

87United Nations Development Program, 2015 Report on the Sustainable Development of Chinese Enterprises Overseas, 2015, Chinese Academy of International Trade and Economic Cooperation, Ministry of Commerce, in

http://www.cn.undp.org/content/dam/china/docs/Publications/UNDP-CH-SSC-2015%20report%20on%20the%20sustainable%20development%20of%20chinese%20enterprises%20overseas.pdf [consulted in June 2016], P. 51 and “Chinese are coming: part 1” in BBC

38 5. Recent Relations China-Vietnam, Findings and Analysis

The hiring of Chinese workers in investment projects in Vietnam has been reported already since 2009. Before it has been reported the discomfort by locals about hundreds of Chinese arriving to work, instead of job creation for Vietnamese⁸⁸. But the topic takes place in the public opinion agenda every time there is an issue related happening. The most recent ones are the attacks over Chinese population and businesses in several regions of Vietnam in May 2014; and the current official visit of Secretary General Xi JingPing to Hanoi in November 2015, when people and activists took advantage of the situation to protest on the streets to speak out about illegal Chinese workers in Vietnam.

The turmoil in May 2014, that ended up in attacks against Chinese population, rose up again the problem to surface, but actually it has been long documented in the press for several years that Chinese workers brought by companies to work in Vietnam has caused discomfort among local people, since they are blamed for taking away jobs from them⁸⁹. Nevertheless, this issue has to be divided in many perspectives, each one pointing at the different reasons which cause the perception that Chinese workers are overtaking jobs that should belong to local Vietnamese, and why it seems Chinese Overseas Direct Investment is not creating new jobs in the host countries.

88 “China’s export of labor faces scorn”, The New York Times, December 20 2009, in

http://www.nytimes.com/2009/12/21/world/asia/21china.html?_r=0 [consulted on Dec 5 2015].

89 “Vietnam denies rumors of huge Chinese workforce at site of deadly riot” in Thanh Nien News, August 29, 2014 http://www.thanhniennews.com/society/vietnam-denies-rumors-of-huge-chinese-workforce-at-site-of-deadly-riot-30496.html [consulted on December 30 2015]; “Vietnam Deports Chinese Workers Amid Rising Nationalist Sentiment” in Voice of America News, http://www.voanews.com/content/vietnam-deports-chinese-workers-amid-rising-nationalist-sentiment/3097719.html [consulted on Dec 12 2015]

39 5.1. Recent conflicts and Normalization with China

During the eighties decade, the relations between China and Vietnam had the Cold War as the background of tensions, specifically over the invasion of Cambodia during Pol Pot’s Khemer Rouge regime and the reinforcement of links of the Soviets with the Vietnamese, while they had previously broke relations with the PRC. That issue triggered the confrontation between the two in the border, at what is known as Sino-Vietnamese War in 1979⁹⁰. Later, when the focus around Cambodia’s situation and government by the UN had lessened in Southeast Asia and the Soviet Union was in process of disintegration, diminishing their presence in the region, China looked for normalization of diplomatic relations with Vietnam in 1991⁹¹.