帶著自己的員工，中國在越南的外國直接投資項目中僱用員工的政策 - 政大學術集成

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(1)國立政治大學亞太研究所英語碩士學程 International Master’s Program in Asia Pacific Studies College of Social Sciences National Chengchi University 碩士論文 Master Thesis. 論文中文題名 Thesis topic. 帶著自己的員工，中國在越南的外國直接投資項目中僱用員工的政策 Bring their own workers: a study on labor practices in Chinese Overseas direct investment projects in Vietnam. Student: Catalina Torres Hernández (佟莉娜) Advisor: Prof. David Holm Ph.D. (賀大衛) 中華民國105年07月 July 2016.

(2) Acknowledgements. First and foremost, I want to thank my thesis advisor Dr. David Holm, whose support, advice and encouragement helped me get this achievement; same goes to the professors of the committee Tse-Kang Leng and Yu-Hsuan Su for all the advice and approval of both thesis proposal and final document. I also want to show my gratitude to the government of the Republic of ChinaTaiwan who granted me with the Taiwan Scholarship to study Mandarin language and to pursue my Masters degree. A deep gratitude to my parents and sisters for their infinite support in all aspects of life, whenever I am feeling weak or strong, they have always been there for me. Also thanks to my closest friends I have met in Taiwan and have become part of my extended family, especially those who supported me during this last period. A last, but not least important gratitude to my Taiwanese friends Charles Cheng, June Chen and Roxana Li for helping me with the required translations in Mandarin language.. 2.

(3) Abstract Chinese companies have sent Overseas Direct Investment to other countries, as part of the government policy “Going Global”, and one of the practices they have is to carry many of their own workers with them, instead of filling these jobs with local employees, as expected for foreign investments. For the case of Vietnam, the identifiable reasons found in this research on why it happens are first, the need of communication and other special skills from employers; second, that actually not all plants where Mainlanders work are from China, but from Taiwan as well; third, there are changes and gaps in the legislation about migration and work permission in Vietnam that are taken as advantage by Chinese employers; fourth, practices in their own way by Chinese when it comes to business and management; fifth, Mainland workers receive their salaries in bank accounts in China, to save for their families and in foreign exchange; and last, during the research it was found the opposite phenomenon of Vietnamese workers crossing the border to work in neighbor provinces in southern China, earning lower wages after long working hours, among other issues. The first part will focus on theories on foreign direct investment; the second part will talk about the economic growth of Vietnam after the Doi Moi or policy of opening to foreign investments in 1986. The third part will refer to the China “Going Global” Policy and the controversy around the employment of Chinese migrant workers in these projects in different countries. The fourth part will describe the reasons and tensions between Chinese and locals and the reasons for the arrival of migrant workers employed in Oversees investments projects in Vietnam. The fifth part will discuss the findings around the hypothesis and the latter part will set up the conclusions. Keywords: China, Vietnam, Going global, Doi Moi, Chinese workers, FDI, Overseas investments, Chinese workers. 3.

(4) Abstact 很多中國公司直接去到外國投資是中國政府的＂走出去＂政策。這些去外國投資者期許的其中一個方式是帶著自己國家的員工，而不去僱用當地的員工。就越南這個案例研究指出其可信的理由。第一是溝通的需求和特別的技術。第二，事實上不是所有廠商的員工都是來自中國大陸，有些是來自台灣。第三，在越南一些關於入境和工作許可在立法上的改變和隔閡，對中國員工是有利的。第四，在處理事務和管理上，可以採取中國的方式。第五，中國大陸員工薪水可以用外國幤值存入中國銀行帳戶，供其家人使用。最後在這些議題之外研究中發現，一些越南幽靈工人，從鄰近中國南部的村莊，跨界到中國，用長的工作時間來換取微薄的薪水。第一部份，我們將會專注在直接去外國投資的理論。第二部份將在越南＂經濟革新政策＂或是1986的＂開放外國投資政策＂後，越南的經濟成長。第三部份將會提到中國的＂走出去＂政策，和在不同國家的投資項目中探用中國移工引起的爭議。第四部份將會敍述中國人和當地人緊張關係的成因和在越南投資項目中僱用移工的原因。第五部份將討論找出所有假設和之後的結果來做成總結。 Keywords: 中國、越南、走出去、革新開放、中國勞工、外國直接投資、對外直接投資、中國大陸員工. 4.

(5) Table of Contents. PREFACE……………………………………………………………………………………………………….…..2 CHAPTER 1: INTRODUCTION…………………………………………………………………………………...6 CHAPTER 2: THEORETICAL FRAMEWORK: FDI AND EMPLOYMENT……………..……………….……10 2.1. Types of Foreign Direct Investment………………………………………………………………….11 2.2. Three scenarios of FDI and employment………………………………………………………….….12 2.3. Cases of FDI in Asia: Flying Geese Paradigm……………………………………………...…….…..13 2.4. Critical Vision of FDI and Labor Market……………………………………………………...…..…15 CHAPTER 3: VIETNAM ECONOMY: BENEFITS AND DISADVANTAGES FROM FDI…...........................17 3.1. Origins of Doi Moi Policy………………………………………………………………………...….17 3.2. Growth in Vietnam: money comes and enter new industries……………………………………….. 20 3.3. Investment Countries in Vietnam – China enters as an investor…………………………………..…22 3.4. Labor and bureaucracy problems with FDI………………………………………………………..…23 CHAPTER 4: CHINA OUTWARDS INVESTMENT POLICY……………………………………………….…25 4.1. Chinese IR Theory: a short review…………………………………………………………….….…26 4.2. Jiang Zemin and the origins of Going Global Policy………………………………………….…….28 4.3. Going Global: outwards investments became important and guidelines…………………………....29 4.4. China as a major world player in investments inwards and outwards……………………………....31 4.5. The problems with outwards investment policy: example Africa……………………….………….34 CHAPTER 5: RECENT RELATIONS CHINA-VIETNAM, FINDINGS AND ANALYSIS..............................37 5.1. Recent conflicts and Normalization with China……………………………....................................38 5.2. Turmoil in May 2014 and visit of Xi JingPing in Nov 2015……………….....................................38 5.3. First reports about Chinese workers in Vietnam…..……………………………………………......40 5.4. Causes of presence of Mainland workers in Vietnam……………………..………………………..40 5.4.1. Managers and Owners requirements: workers need language and skills………………..41 5.4.2. Some plants and/or companies actually come from Taiwan and not China.....….……...42 5.4.3. Constant change in legislation and administrative. 5.

(6) Processes: work permits, migration law………………………………………………….....43 5.4.4. Chinese do its own way……………………………………….………………….…..44 5.4.5. Send workers abroad to generate foreign exchange……….…………………….……45 5.4.6. The undocumented workers are going both sides: Vietnamese in China…………….45 5.5. Discussion….…………..………………………………………………..………………….........46 CHAPTER 6: CONCLUSIONS…………………………………………………………...………………..…51 REFERENCES…….…………………………………………………………………………........…………..54 APPENDIX………………………………………………………………………………………………...….60. 6.

(7) Tables and Figures. TABLE 1: Process of Doi Moi Policy: Keydates……………………………………………………………19 TABLE 2: Vietnam economic indicators (comparison)……………………………………………………...21 TABLE 3: Ten Major Investor Countries in Vietnam by 2014……………………………………………...24. FIGURE 1: Vietnam yearly unemployment rate per percentage…………………………………………….23 FIGURE 2: Net overseas investments of China in Vietnam (millions of USD)…………………………….33 FIGURE 3: China vs. Vietnam Unemployment Rate……………………………………………………….34. 7.

(8) 1. Introduction. In 2006, many years after the successful policy of open doors to attract investment inwards, and several years of negotiations that started in 1999 to implement the next step, China decided to widen the scope of its foreign investments attraction policy; this time to go abroad to be themselves the investors –the called “Going Global” strategy-1. By 2013, China already had accumulated 870.4 thousand million US dollars in overseas direct investments; each one valued over a 100 million dollars.2And as for 2015, was reported that already had surpassed the United States as the main recipient of foreign direct investment (from now on FDI)3. However, there is a particular situation occurring in most destinations of Chinese overseas projects, which is causing annoyances among the recipients of investments: when Chinese companies arrive, they bring their own employees from Mainland China to work in the projects, rather than hiring local workers4. And the same seems to happen in many other places where Chinese investment projects are located, such as the case of Vietnam. Through investments capital and projects5, such as infrastructure construction, China is helping Vietnamese making their economy grow, who at the same time wants to copy their economic development model6.. 1. MILLER, Ken, “Coping with China’s Financial Power – Beijing’s financial foreign policy”, in Foreign Affairs, Jul-Ago 2010 issue, https://www.foreignaffairs.com/articles/china/2010-07-01/coping-chinas-financial-power [consulted on April 20 2015] 2 Data from World Bank extracted from “Mayor participación en puerta” [English Translation as “Major entry participation”] in El Financiero; 14th November 2014, in http://www.elfinanciero.com.mx/pages/el-mapa-que-teexplica-como-se-mueven-las-inversiones-chinas.html [revised on 15th November 2014]. 3 “China overtakes US for Foreign Direct Investment”, BBC News Online, 30 January 2015 [revised on March 20th 2015] http://www.bbc.com/news/business-31052566 4 The case of Angola was presented in the BBC documentary “The Chinese are coming –Part 1” (2011), in th https://www.youtube.com/watch?v=kSbZ1wxV87c [link revised on 18 November 2014]. 5 th According to data from Vietnamese Foreign Investment Agency until Dec. 2012, China is the 13 biggest investor in the Southeast Asian country, represented in 893 projects, with a Total registered invested capital of. 8.

(9) During the same time, in the Eighties decade, specifically in 1986, Vietnam also started to implement an open economy to attract investments from abroad, policy known as Doi Moi, that indeed helped making Vietnamese economy grow and from which started receiving majority of investments from the U.S7, as well as other Asian countries like Japan, South Korea and Singapore and later on, also from China8. But, it is to remember that Chinese and Vietnamese have shared a common history framed in permanent tension since ancient times that has led to a hedging diplomatic strategy from Vietnam towards its neighbor9, where they always have played with precaution within its bilateral relations due to a kind of tensed calm, since the Sino-Vietnamese War in 1979. This lasted the whole next decade, until they signed peace in 1991; the period that is called Normalization of Sino-Vietnamese relations10. The events of the riots last May 2014, due to the deployment of an oil rig in disputed seas by both countries, proved that once again. This event that was widely reported by the international media11, told stories about how Chinese migrant workers, as well as factories and owners were attacked by the Vietnamese in the turmoil, stirring the resentment, not only by the recent events, but also after years of tension. Later on, the visit of. 4,697,221,553 USD. Data Source: • MINISTRY OF PLANNING AND INVESTMENT, Socialist Republic of Vietnam, Brief on foreign direct investment in 12 months, 2012, http://www.vietnam-report.com/vietnam-fdi/ [accessed the 25 July 2014] 6 CHEONG Kee Cheok, LEE Poh Ping & LEE Kam Hing; “China model for Vietnam’s economic development”, in Issues & Studies Vol. 47 No. 4, Dec. 2011, National Chengchi University, Institute of International Relations. 7 TRAN Dinh Lam, Foreign Direct Investment in Vietnam, Center for Vietnamese and Southeast Asian Studies, University of Social Sciences and Humanities, Vietnam National University, Link: http://www.bot.or.th/Thai...nt%2520in%2520Vietnam.pdf [accessed in July 28 2014] 8 Also indicated in Foreign Investment Agency data, ibid. 9 YANG, Alan Hao, CHEN, Ian Tsung-Yen: “A harmonized Southeast Asia? Explanatory typologies of ASEAN countries’ strategies to the rise of China” in The Pacific Review, 2013, UK, Routledge, pp. 14-16. 10 Le Hong Hiep, “Vietnam’s Hedging Strategy against China since Normalization”, in Contemporary Southeast Asia, Vol 35 No. 3 (2013), Institute of South East Asian Studies, p. 333. 11 The coverage by the British newspaper The Guardian is among the most complete. http://www.theguardian.com/world/2014/may/15/vietnam-anti-china-protests-oil-rig-dead-injured. 9.

(10) President Xi Jingping in 2015 seemed to be an attempt to calm down the tensions and reassure a strong economic cooperation between the two. One of the multiple reasons that possibly raise this negative sentiment towards Chinese people is the fact that within the investments coming from China, companies bring their own migrant workers with them, rather than creating more job opportunities for local Vietnamese population, as promised to be one of the goals of receiving foreign investment. About the methodology, this research has been elaborated using qualitative methods, based on historical, political and IR analysis, rather than from a quantitative economical vision, even though the topic is on economics, and that fact can be considered as one of this research limitations. The main sources of information used have been publications –books and journals-, search for news in both articles and videos, and statistics from governmental sources of both China and Vietnam, as well as other reliable sources like the Asian Development Bank, UNCTAD and the World Bank. Among the difficulties to elaborate this research are not counting with enough financial resources to do a field trip neither to China or Vietnam; to not speaking Vietnamese language and very little understanding of Mandarin, therefore relying and limiting to the information available in English; and therefore not having access to more comprehensive or precise sources of information about this topic in the original languages.. 10.

(11) 2. Theoretical Framework: FDI And Employment. There is much discussion about the relation between employment and Foreign Direct Investment (FDI)12. If it’s the best policy to adopt in order to create numerous jobs in a developing country; or if it causes the opposite effect of a massive loss of jobs due to lack of competitiveness, adequate infrastructure for trade and export markets or having weak domestic markets that make inner industries go bankrupt in favor of multinational companies; or if it only benefits the companies involved directly in the investments –either state or private-owned- rather than the investment-recipient economies. The reality is while the adoption of the policy to call in FDI to generate economic domestic development has not helped much in many global regions -like Latin America and Sub-Saharan Africa-, it was successful in most parts of Southeast Asia, ever since the emergence of the Four Dragons of East Asia since the late seventies –Singapore, South Korea, Taiwan and Hong Kong-, and even after the Asian Financial Crisis since mid 1997, with different results for the several nations of the group known as ASEAN, and in which Vietnam case stands out above the others. 12. LEE Shun Pinn Stan et. Al. “Empirical Analysis of Employment and Foreign Direct Investment in Malaysia: An ARDL Bounds Testing Approach to Cointegration”, in Advances in Management & Applied Economics, 2011 vol.1, no.3, ISSN: 1792-7544 (print version), 1792-7552; BLOMSTROM, FORS AND LIPSEY “Foreign Direct Investment And Employment: Home Country Experience in The United States and Sweden” in The Economic Journal, Volume 107, Issue 445, November 1997 Pages 1787 1797; AITKEN and HARRISON, “Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela” in The American Economic Review, Vol. 89, No. 3 (Jun., 1999), pp. 605-618; BLOMSTROM and PERSSON, “Foreign investment and spillover efficiency in an underdeveloped economy: Evidence from the Mexican manufacturing industry” in World Development, Volume 11, Issue 6, June 1983, Pages 493-501; Cletus C. Coughlin, Joseph V. Terza and Vachira Arromdee “State Characteristics and the Location of Foreign Direct Investment within the United States” in The Review of Economics and Statistics, Vol. 73, No. 4 (Nov., 1991), pp. 675-683; LIPSEY, “Home- and Host-Country Effects of Foreign Direct Investment” in Baldwin and Winters, Challenges to Globalization: Analyzing the Economics, February 2004, National Bureau of Economic Research; X. LIU, P. SILER, C. WANG, Y. WEI, “Productivity Spillovers From Foreign Direct Investment: Evidence From UK Industry Level Panel Data” in Journal of International Business Studies September 2000, Volume 31, Issue 3, pp 407–425, etc.. 11.

(12) for its impressive economic and technology development in the last decade. Also leaving aside the very unique case of China as the most notorious in terms of adoption of an open-market system to generate economic growth, it can be said that the adoption of FDI policies all across Asia has been beneficial in terms of general economic growth13 and boost the national states. However, that not necessarily means the jobs created through FDI would always help working population to escape from poverty or get trapped in the harsh labor conditions –issues related to human rights and development- like cheap wages for long shift hours, modern slavery, poor or null workers conditions, negation of human rights to the working force, etc, problems that persist in many developing countries, for which is debatable the link between FDI and human resources development, rather than a policy for mere accumulation of capitals14. 2.1.Types of Foreign Direct Investment Bringing FDI has many objectives for each country planning to open its economy or company willing to invest in another territory. Here are the main reasons for the exchange of investments among markets and countries15: a. Market seeking projects: These are investment projects that look to conquer the host markets, mostly in neighbor countries. Because of this, there are various important factors to be considered, like the size of the market, in terms of number of population; total host country GDP or GDP per capita; strength of the local firms, active domestic competition or ease of access to 13. HUANG Deng-Xing, “Inward FDI and economic development in Southeast Asia” and “Foreign Direct Investment and Economic Development: Vietnam’s experience”; 2012, Taiwan Journal of Southeast Asian Studies, Vol. 9, No. 1, Pp. 26-27 and P. 56. 14 DE SHUTTER Olivier, SWINNEN Johan, WOUTERS Jan, Foreign direct investment and human development: the law and economics of international investment agreements, 2013, New York : Routledge. P. 37 15 TRAN Dinh Lam, Foreign Direct Investment in Vietnam, 2013, Center for Vietnamese and Southeast Asian Studies, University of Social Sciences and Humanities, Vietnam National University, http://www.bot.or.th/Thai...nt%2520in%2520Vietnam.pdf [revised in July 28 2014], Pp. 4-5.. 12.

(13) services and distribution channels, etc. Also the flexibility in investment laws, such as low tariff costs, is attractive for market seeking. b. Efficiency seeking projects: These projects are thought to take advantage of lower costs of production in different soil to augment profits. The massive labor hand at low cost of wages is a characteristic of this type. So as the capacity of skills and education of workers is considered an advantage. Also to take into account is the efficiency in transport, communications, and infrastructure, and the value of the currency, in which case is preferable a stable and under valuated exchange rate to generate more profits. c. Resource seeking projects: All related to commodities, raw materials, natural and energy resources, where they are not scarce or of expensive processing. For these projects to be attractive for investors is important the legal and environmental issues, as well as the conditions of extraction infrastructure; thus political stability is a key factor for these investments, same as agility in bureaucratic procedures and requirements and offers to competitors, when needed. 2.2. Three scenarios of FDI and employment The relation between FDI and employment can be seen through three different focuses. The first one is the arrival of capitals via investments that helps generate a more active commercial activity, by opening of shops and stores that moves flows of money, or create jobs in the services sectors that are linked to industrial production16. The second one is a renewal of personnel or capital injections to obsolete or stagnant firms or movements like mergers and acquisitions of local companies to either make them bigger or help as a platform for entering easily to a. 16. LEE Shun Pinn Stan et. Al. “Empirical Analysis of Employment and Foreign Direct Investment in Malaysia: An ARDL Bounds Testing Approach to Cointegration”, in Advances in Management & Applied Economics, 2011 vol.1, no.3, ISSN: 1792-7544 (print version), 1792-7552 (online); International Scientific Press, P. 77.. 13.

(14) domestic market in a more familiar way17. The third one is an increase in the host country unemployment by the bankruptcy of local businesses because of not having enough resources to compete with multinational of foreign companies that offer the same goods and services, but with better quality, major capacity of research & development (R&D), cheaper prices or more attractive and well-managed marketing strategies, among other reasons 18. This last case occurred during the nineties decade in Latin America19. That is why the generation of employment through FDI is still very controversial and discussed.. 2.3. Cases of FDI in Asia. Huang Deng Xing and other authors20 have pointed out the Flying-Geese paradigm as a theoretical explanation on how most East Asian countries introduced the attraction of foreign investments to develop their economies, especially after the cases of Japan and the Four Dragons since the seventies. This theory date back from the 1930’s by Professor Kaname Akamatsu, which raised a scheme in which all Asian countries are aligned like a flock of geese into development. Following the rise of Japan in the 1960s after the post Second World War period21. 17. LEE, Ibid. LEE Ibid. 19 LIPSEY (2004) “Home- and Host-Country Effects of Foreign Direct Investment”, Op. Cit. P. ; FEENSTRA Robert, HANSON Gordon, “Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras” in Journal of International Economics, Volume 42, Issues 3–4, 1 May 1997, Pages 371–393; AITKEN and HARRISON, “Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela” in The American Economic Review, Vol. 89, No. 3 (Jun., 1999), pp. 605-618. Also see the numerous works by authors Guillermo O’Donnell and Boaventura de Souza Santos, on the impact of the arrival of Multinational corporations on employment and labor conditions for the population in Latin America. 20 HUANG Deng-Xing, “Foreign Direct Investment and Economic Development: Vietnam’s experience”; 2012, op.cit; KASAHARA Shigehisa, “The Asian Developmental State And The Flying Geese Paradigm”, UNCTAD Discussion Papers, No. 213, Nov. 2013, http://unctad.org/en/PublicationsLibrary/osgdp20133_en.pdf [seen May 18 2016]. 21 CORNIA Giovanni, KIISKY Sampsa, “Trends in Income Distribution in the Post-World War II Period”, Sept 2001, World Institute for Development Economics Research Discussion Paper No.2001/89, United Nations University, Florence, Italy, in 18. 14.

(15) and later the Four Dragons from the seventies, the theory gained again popularity to explain East Asian development, led by the most advanced nation, in this case Japan, who directs the rest of countries ahead into development, then followed by South Korea, Singapore, Taiwan and Hong Kong; queuing behind are the ASEAN leaders Thailand, Malaysia and Indonesia and on the back were located the least developed countries back then, China, Vietnam, Philippines and others22. The characteristics of this East Asian Developmental State –as is known- are a responsible management of macroeconomic issue, achieve stability, an agile and efficient bureaucratic system, understanding between the state and private business sector and a well-planned industrial and development policy with public control and accountable management of resources23. It seems therefore logic how basically this scheme seemed to show the following route in the East Asian economic development as it happened in reality. The only difference is that after the Asian Financial Crisis, the so-called “leading goose” of the region is now China, rather than Japan, and it was a natural leader for the late-comer transition of socialist regimes that emerged into an opening market system, but for this case using China as an unique example of transition to an open-market transition inside a one-ruling-party political system. For Vietnam, the benefits of FDI let them solve the lack of capital, lagging in technology and strengthen its skills for commerce24. However the labor problems seem to remain, despite a reduction in the unemployment rate.. https://www.researchgate.net/profile/Giovanni_Cornia/publication/23984901_Trends_in_Income_Distribution_in _the_Post-World_War_II_Period_Evidence_and_Interpretation/links/54aab7970cf2ce2df668aec1.pdf [accessed in August 15th 2016]. 22 HUANG, op.cit.; KASAHARA, op.cit. 23 KASAHARA, “The Asian Developmental State…”, Ibid. UNCTAD, 2013, P. 2. 24 HUANG, “Foreign Direct Investment...” Ibid.. 15.

(16) 2.4.Critical vision of FDI and Labor Markets And that is one of the critical visions on FDI and labor. Professor Rhys Jenkins presents a more critical focus on this when analyzing the case of Vietnam related to globalization and employment25. In first place, effects of FDI in labor markets can be both positive and negative. Through investments is possible to create new “greenfield plants” that increase the laborintensive industries, or create linkages among local firms. The labor increase also occurred by training of employees and technology transfer –one of the actual benefits of FDI for economiesthat would spillover from foreign to local firms. Other of the benefits is the possibility of higher labor conditions and wages than the encountered in the domestic market, or more stability if the company is big enough26. Among the negative effects, there are direct and indirect ones and depend on quantity of jobs, quality and location. The acquisitions sometimes create a restructuring of personnel, and as a result reducing the amount of jobs the local firms hired before, since for capital-intensive industries, the investment in creating new jobs is very low. It introduces uncomfortable practices of hiring and promoting employees, such as only creating jobs for very specialized skills or unstable and highly competitive work environment inside the firm. And it creates an impact in the host place where the FDI project is located, since the arrival of more employees would put a pressure in already overcrowded urban spaces and facilities. There is also the risk of absolute dependence of the projects results in terms of import sales. If the venture do not create the profits expected or a change of location of the project is decided, then it causes major job loss in a community previously benefited by the FDI. And in an attempt to compete successfully in the 25. JENKINS Rhys,“Globalization, FDI and employment in Vietnam”(2006) Transnational Corporations,Vol.15,No 1http://biblioteca.hegoa.ehu.es/system/ebooks/15903/original/Globalization__FDI_and_Employment_in_Vietna m.pdf [consulted in June 20 2016] 26 JENKINS R., Ibid. P. 116.. 16.

(17) domestic market, the foreign firm would reduce the wages of its workers to compensate the low attractive prices to consumers and not lose profits. Finally, if the foreign company relies on import suppliers, it would displace the local production and generate imbalance of job markets27. The next section will see how Vietnam has taking advantage of the arrival of capitals derived from FDI and also its negative effects.. 27. JENKINS, op.cit. P. 117.. 17.

(18) 3. Vietnam Economy: Benefits And Disadvantages From FDI. Vietnam economy has much benefited from receiving Foreign Direct Investment (FDI); one of the aspects is creation of employment. By the decade of the 1980s, the country’s infrastructure was in deplorable conditions and the primary sector –mostly agriculture- was the main engine of a modest and impoverished economy, compared to their more developed neighbors in Southeast Asia, like Singapore, Malaysia or Thailand. After the arrival of the foreign investments, the biggest cities –Ho Chih Minh and Hanoi-changed drastic and dramatically in the awake of the nineties decade, being the streets flooded with advertisement banners promoting the famous western brands when globalization appeared in the socialist country28, until becoming in one of the fastest-growing economies of Southeast Asia within the next 25 years from then, even competing with China to host investments from foreign nations. However, the quality of employment created by FDI is not always beneficial for the majority of its population, many of those earning much less for long hard working hours and in the case of China’s investments, not even jobs were provided. 3.1. Origins of Doi-Moi policy Vietnamese economy has been for 20 years one of the fastest growing ones in Southeast Asia. This was possible after the ruling Communist Party launched the open system reform, that triggered the economic growth. The opening reform known as “Doi Moi” adopted from 1987which means “renovation” in Vietnamese language- was a response to a socioeconomic crisis inside the country and a need to separate the economy from the state in times of big changes in 28. HIEBERT Murray, Chasing the Tigers¸ 1996, NY, Kodansha International Ltd., Pp. 113-118. 18.

(19) international politics. All of that, in order to build a flexible framework for economic, social and political reforms: a socialist market economy, people requesting more accountability from the authorities and to rethink a more representative role of the National Assembly29. This situation was not by chance. Not only was Vietnam passing through a major political change. So did China with the reform made by Deng Xiao ping since 1978 and the one made by Gorbachev during the mid eighties in the Soviet Union. There was an international time that was moving into globalization and free and open markets, away from a tight control of the economy by the state, which was prevalent in all the mentioned countries30. Table 1 Process of Doi Moi Policy: Key dates . 1987: Promulgation of first Foreign Direct Investment Law. . 1991: Normalization of diplomatic relations with China. . 1992: Constitution of the Socialist Republic of Vietnam. . 1994: Drop of U.S. embargo. . 1995: Admission into ASEAN. . 1996: Law on Foreign Direct Investment within the 1992 Constitution. . 2000: Amendment of FDI Law. . 2007: Admission into WTO. 29. SALOMON Matthieu, “Power and Representation at the Vietnamese National Assembly: The scope and limits of political Doi Moi”, in BALME S. and SIDEL M. Vietnam’s New Order: International perspectives on the State and Reform in Vietnam, 2007, NY, Palgrave Macmillan. Pp. 200-201. 30 TSUBOI Yoshiharu, Twenty years after the adoption of the Doi Moi policy, 2007, Waseda University, in https://dspace.wul.waseda.ac.jp/dspace/bitstream/2065/12801/1/43_070321-Tsuboi-e.pdf [consulted on May 27 2016]. 19.

(20) Until 1986, the country had followed a strictly planned economy from the central headquarters of the Communist party in Hanoi and a strategy of substitution of imports and restriction in trade, which included high tariffs in products from abroad and avoidance of competition between domestic market and imports31. After Doi Moi, Vietnamese economy opened and became market oriented, which made a reduction in inflation from 780% in 1986 to 14.4% by 1994. And after almost two decades, by 2010, it reached a gross domestic product (GDP) of 103 billion USD and a GDP per capita of 1174 USD32. Among the measures taken by the government was a great investment in state-owned enterprises, creating a friendly environment for entrepreneurial projects, with very relaxed laws for making investment attractive inside the country33. Once the economic system opened, Vietnam became very attractive for export-driven investments by foreign companies and for the development of infrastructure like highroads, telecommunications and power plants. This was possible through the promulgation of the Law of Foreign Investment in 1987. Among the government policy objectives were to “expand cooperation with foreign countries, develop the national economy and increase exports on the basis of efficient exploitation of natural resources, labor, and all other potential of the country; (…) encourage and create favorable conditions for the investment in Vietnam by foreign organizations and individuals and the expansion of cooperation and investment between foreign countries and Vietnamese economic organizations from all sectors.”34; therefore reducing. 31. BHATT, P.R., “Causal Relationship between Exports, FDI and Income: The Case of Vietnam”, in Applied Econometrics and International Development, Vol. 13-1 (2013), Pp. 161-162. In http://www.usc.es/economet/journals1/aeid/aeid13113.pdf [consulted on May 16 2016]. 32 UNCTAD, Hand Book of Statistics, 2010, in http://unctad.org/en/pages/PublicationArchive.aspx?publicationid=2382 33 BHATT“Causal Relationship…” Ibid. P. 163 34 SOCIALIST REPUBLIC OF VIETNAM, Law on Foreign Investment in Vietnam, Hanoi, December 27 1987, [accessed on August 15 2016 in link http://www.kenfoxlaw.com/resources/legal-documents/laws-and-codes/12462-luat-sp32177.html]. 20.

(21) obstacles to foreign investments, ownership and private sectors, liberalized trade, deregulated prices to combat high inflation, and state companies reformed. Nowadays, Vietnamese legislation on FDI is very flexible and permissive, in order to ease the environment easier for private investors and impulse development of human resources, which is one of the purposes of this policy35. Table 2. Vietnam economic indicators (comparison)36 1986. 1994. 2010. Inflation. 780%. 14.4%. 6%. GDP (percentage). No data. 8.8%. 6.8%. FDI Projects (capital in USD). No data. 1048 million. 7100 million. Unemployment Rate. No data. *Employed: 32.2 million people. 2.0%. 3.2. Growth in Vietnam economy: money comes and entering in new industries After dropping the trade embargo in 1994, United States got approved 30 percent of projects, reaching USD 10.9 billion at the end of the very first year. By the end of 1995, investment projects summed up an amount of USD 18.2 billion. In the same year, Malaysia got approved projects for a sum of USD 8.2 billion, Taiwan for USD 3.3 billion and Korean companies got contracts for over USD 500 million. Behind were Hong Kong and Singapore and leading that group was Japan as the biggest investor and aid donor for Vietnam37. Back in that time, China. 35. BHATT, “Causal Relationship…” Ibid. Sources: UNCTAD, ADB, General Statistics Office of Vietnam 37 HIEBERT Murray, Chasing the Tigers¸ Pp. 133, 134, 144. 36. 21.

(22) was more a competitor of Vietnam to receive foreign investments, rather than generating its own and collaborating with each other.. Vietnam has reached a 39.7% of the GDP and 4.7% of economic growth by 200838. Many sectors have contributed to this economic growth, including export-based industries, processing and manufacturing, energy –oil, gas, coal- and other natural resources, real estate and construction. From 2012 to 2015, the entry of capitals derived from FDI reduced the trade deficit of USD 96 million and turned it into a surplus of USD 17.15 billion. Another most recent sector Vietnamese economy is exploring recently is in services using high and information technologies, such as mobile apps for travelers and low-cost airline on the internet39.. This also contributed to the reduction of unemployment rate. The records from 1998 mark 4.5 percent of unemployment. With two small variations going down as a result of the Asian Financial Crisis from 1997 and dropping down again during the times of the Global crisis in 2007, but in any case never climbing up to 5%, by 2011, the unemployment rate marked a 2.0 of percentage40.. 38. UNCTAD, Hand Book of Statistics, 2010 “Like Uber for local experiences'”, CNN news online, section Road trip to ASEAN, in http://edition.cnn.com/videos/world/2016/05/19/road-to-asean-vietnam-triip-me-pkg-lu-stout.cnn [seen and consulted in May 2016] 40 ASIAN DEVELOPMENT BANK, Vietnam Data 2011, in www.adb.org /publications/viet-nam-fact-sheet [consulted in Feb 2015] 39. 22.

(23) Figure 1 Vietnam yearly unemployment rate per percentage (Source: Asian Development Bank) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011. 3.3. Investment Countries in Vietnam and China enters as an investor The main investor countries vary per year, being predominant in the first places South Korea, Japan, Taiwan and Singapore. In representation of China, Hong Kong contributed to Vietnam GDP with USD 3 billion in approved projects in 2014, which equals 14.8% of incoming investments that year41. Investments from China, although not among the first places of biggest investors like the mentioned above, they are not insignificant either. From 2012 climbed from the number 13th to the number 9th of major capitals brought with USD 7.952 million and 1.089 projects approved. Its contribution in 2013 was through the building of a coal-fired power plant in Vinh Tan with an investment capital of USD 2.018 billion42, same that later on was affected in the riots in May 2014. By December 2015, there were not significant projects coming from China, which in part can be explained for the same reason or the ban promulgated from Chinese government to warn its citizens to go or visit Vietnam, topic to be detailed in chapter 4. 41. All paragraph data from Ministry of Planning and Investment of the Socialist Republic of Vietnam, 2015, in http://www.mpi.gov.vn/en/Pages/ktxh.aspx?idcm=289 [consulted in May 2016]. 42 Ministry Of Planning And Investment of Vietnam; 2015; Ibid.. 23.

(24) Table 3 Ten major investor countries in Vietnam by 2014 No.. Investor. 1 2 3 4 5 6 7 8 9 10. Projects. S. Korea. 4.110 Japan 2.477 Singapore 1.351 Taiwan 2.368 British Virgin 549 Islands Hong Kong U.S. Malaysia China Thailand. 869 717 484 1.089 374. Total registered capital (million USD). 37.233 36.891 32.745 28.401 17.987 15.463 10.937 10.768 7.952 6.691. Source: Ministry of Planning and Investment of Vietnam, 2015.. 3.4. Labor and bureaucracy problems along with the FDI However, the great economic growth derived from the capitals that investments have not only brought benefits to Vietnam. Problems related to labor have risen all along the way, mostly affecting to manufacturing workers. First, the precarious wages paid to workers after long labor hours, being the highest monthly salary expected 2 million dong –either working for an FDI or a domestic company-, which represents around less than 100 USD43. So, despite the multiple job opportunities foreign companies can create, these do not release working population away from poverty, but sometimes rather condemn them to labor exploitation and deprivation44.. 43. Data: ARNOLD (below). Source: American Chamber of Commerce Vietnam, th http://www.amchamvietnam.com/?id=4773 [accessed on August 16 2016] 44 On this part, see ARNOLD D. “Social Margins and Precarious Work in Vietnam” (Pp. 468-487) and HEWISON K. and KALLEBERG A. “Precarious Work and Flexibilization in South and Southeast Asia” (Pp. 395-402), both articles in American Behavioral Scientist, 2012, 57 (4), SAGE Publications.. 24.

(25) This is such the case of worldwide famous garment brands like H&M, Mango or Marks&Spencer, whose suppliers have located many factories to Vietnam. This industry employs mostly young women to work for strenuous shifts and they even express themselves have received around 160 USD (or 145 Euros) every month, which equals the selling price of five t-shirts in Europe, while they make thousands of those, apart from claiming they have been treated worse than animals and not like people45. This case reminds much of the news about the collapse of the factory building Rana Plaza in Bangladesh on April 23th 2013 where “most (victims) were female garment workers.”46 Second, even though the legislation to bring FDI to Vietnam have relaxed much, the highlycentralized bureaucracy and long and slow administrative processes is still a hassle for foreign businessmen, that often encounters gaps in the laws and corruption47. Confusing requirements, too many formalities and slow process to issue working permits is one of those recurrent troubles that may affects trade and investments; persistent problems since mid nineties until even 201448. Before seeing in detail the interaction between Vietnamese and Chinese, a brief look on Chinese investment policy history will continue, with a special emphasis in the outwards investments they carry abroad and on which conditions.. 45. Case presented in the Spanish TV program Salvados, chapter “Fashion Victims: What’s behind low-cost clothing?”, La Sexta Channel, February 17 2016, at 21:30 [consulted on March 21 2016] link: http://www.lasexta.com/programas/salvados/avances/salvados-explica-fenomeno-fast-fashion-producir-ropabarata-que-dure-muy-poco-tiendas_201602175723bb154beb28d446ffff1e.html 46 “Bangladesh factory collapse toll passes 1,000” in BBC News Asia, http://www.bbc.com/news/world-asia22476774 [accessed on August 15th 2016] 47 HIEBERT Murray, Chasing the Tigers¸ 1996, NY, Kodansha International Ltd., Op. Cit. Pp.136-141 48 “Confusing work permit policy concerns foreigners in Vietnam” Thanh Nien News, Friday June 6 2014, inhttp://www.thanhniennews.com/business/confusing-work-permit-policy-concerns-foreigners-in-vietnam26977.html [consulted on December 29 2015]. 25.

(26) 4. China Outwards Investment Policy. Vietnam is not the only country where China has invested, but it is one more country on the list having a lot of problems when these investments arrive, and complaining about the lack of job creation from the companies that establish factories, plants and businesses, as part of the policy of overseas investments Beijing has agreed with many governments. In the following chapter will be analyzed this policy, to see if those results are related to a political decision by the government and the business owners or just due to the pragmatism of the Chinese when it comes to its foreign policy. Rather than intend to harm a country’s economy on purpose, it seems instead China has its own rules and is trying to practice another type of foreign policy, away from Western liberal norms that predominate in the international system, and more based in their identity, strong nationalism and in defense of their rising economy over all. That is probably one reason why the Overseas Direct Investment Policy (對外直接投資), known as “Going global” (走向世界), has created a big controversy among all the recipients of Chinese investments, when companies arrive to the countries with Mainland Chinese workers instead of creating jobs for local population where they arrive49. The most documented case of application of Chinese overseas investment policy is in Africa, but these unusual practices appear in most countries where they go, including Latin America and Southeast Asia, like the case of Vietnam, which is very special for historical reasons. But before. 49. See in Appendix A “5. Circular of the Ministry of Commerce of the People's Republic of China on Printing and Issuing the Provisional Measures for Administration of Labor Service to Foreign Contracted Projects”, MOFCOM. 26.

(27) seeing the problems with the overseas investments, it is first needed to take a look at the origins of this policy and try to understand the logic behind Chinese foreign relations. 4.1. Chinese IR Theory discussion: short review To address a clearer understanding of foreign policy from a Chinese point of view, a good start is to listen to what they have to say. Scholar Wang Jisi presented a Chinese perspective of International Relations (IR) theory50, by the times of big economy’s growing in the nineties. Although PRC experts were keen to learn about Western IR literature and the classic realist theory made a greater impression on them, the way international issues are observed from a Chinese approach is different; therefore scholars needed to formulate a coherent conceptual framework to deal with changing times in a more connected China with the rest of the world51. For Chinese, theories are policy-oriented or much related with decisions taken by the Party and, since foreign relations are among the more sensitive areas for the government, so those theories are considered private issues to let being public and thus hardly known52. Another characteristic of Chinese political tradition is that simple generalizations are more taken into account than Western theories that are seen more ethereal, empty talk or not based on real facts -like Behaviorism was considered too abstract by Huan Xiang, Deng Xiaoping’s foreign policy advisor- whereas Chinese trust more in simplify general conclusions from facts, often leading to confusion when interpreted53.. 50. WANG Jisi, “International Relations Theory and the Study of Chinese Foreign Policy: A Chinese Perspective”, in ROBINSON Thomas, SHAMBAUGH David, Chinese Foreign Policy: Theory and Practice; UK, Clarendon Press, Oxford, 1994 51 WANG, Ibíd. P. 481 52 Ibíd. P. 483 53 Ibid. Pp. 491-497.. 27.

(28) However it is not like the international behavior of China cannot be explained, but one should rather pay attention of its reactions to global events, which involve socialist ideology, Chinese national interests, domestic and international situation, and the climate around leadership changes, among many factors. By the nineties, political studies on Chinese international decision-making had not been yet systematized or successful compiling theories to explain54. Almost twenty years later, in 2013, scholar Wang Hung-jen presented similar reasons why Chinese IR theories should be seen from a different light than the ones from the West –realism, interdependence, world system and behaviorism, to mention some-, arguing that there is a close relations between IR scholarship and foreign policy goals based on state interests, besides the strong influence of identity and the spirit of China’s rise as a factor for academy thinking55. Wang proposed these factors shape the policy oriented with other strong world powers like the U.S. and Japan, as well as with the neighbors in Southeast Asia, where the discourse emphasizes in cooperation, negotiation and dialogue, but for the case of Vietnam, relations are also defined by historical tensions and disputes for territorial interests. The critic of this study by Amy King lies on the lack of direct interviews to Chinese IR professors and officials to confirm or reject the idea that the CCP defines the scholar research guidelines or the academics point of view56. Authors Heilmann and Schimidt also proposed there is a multilevel policy experimentation and informal business activity to continuously help with China’s expansion57. Framed by the Fiveyear plans, Chinese foreign policies are long-term strategic but with a fast-pace change nature,. 54. Ibid. Pp. 499-500. “The Rise of China and International Relations Scholarship” by Hung-jen Wang, Review by: Amy King, The China Journal, No. 72 (July 2014), P. 195. 56 King, China Journal, Ibid. p. 196 57 Sebastian HEILMANN and Dirk SCHMIDT ,“China's Foreign Political and Economic Relations: An Unconventional Global Power”,. Book review by VOLZ Ulrich, in The China Quarterly, Volume 224, December 2015, p. 1096. 55. 28.

(29) since every five years means a new reform based on experiences from the results of each policy58. 4.2. Jiang Zemin and the origins of Going Global policy Although the Going Global policy started by 2006, the idea of taking Chinese companies out of the borders to establish factories to produce and invest in other countries –particularly with the neighbors- was long discussed on the previous years by the Communist Party. After the great results of the opening up policies that received investments from foreign countries in China soil, since Deng Xiaoping led the economic reforms throughout the 1980s, it was time for his successor Jiang Zemin to think about the future and to maintain the progress of Chinese economy. It was Jiang in 1997 who first proposed the next step in the opening up reforms to the National Congress. One of the main points to highlight was to strengthen state-owned enterprises to turn them into large groups, competitive enough to go invest in trans-national operations, in order to increase the offer of goods and labor services abroad59. The other point is the noninterference by the government in the ownership of enterprises, and although there might be a direct financing to support their growth, there is a separation in administrative functions between the enterprises and the state60, for the state will not take responsibilities in companies’ practices and operations. These points can be taken as earlier guidelines in later proceeding by Chinese companies investing abroad.. 58. VOLZ; “China's Foreign Political…”, Ibid. p. 1097. Jiang Zemin's Report at the 15th National Congress of the Communist Party of China, Source: Beijing Review, http://www.bjreview.com.cn/document/txt/2011-03/25/content_363499.htm [consulted on November 28 2015]; Also: SHAMBAUGH David, China goes global: The partial power, 2013, UK, Oxford University Press, P. 175 60 Jiang Zemin Report, Ibid. 59. 29.

(30) So, the origins of “Going global” date long before the actual policy was implemented in 2006, in the nineties, around at the same time with normalization of relations with Vietnam and when investments arrival changed the face of both countries.. 4.3. Going global: outwards investments became important and their guidelines In July 2004, the document called Guidance Catalogue for Overseas Investments in Foreign Countries and Industries was promulgated, which defines the type of investments to be made abroad by China. The official start of the “Going global” policy is framed between 10th and 11th Five-year plans from 2002-2005 to 2006-201061. By January 2015, a draft of the revised Investment Law had been already prepared by the Ministry of Commerce 62the institution in charge of managing all related to “Going global” policy63. The need for this policy was to release the pressure of excessive reserves of foreign currency –in this case U.S. dollars-, and to make domestic companies more competitive by interacting in developed markets64, among others. The purposes of the outwards policy are 1) To seek natural resources that are scarce in China; 2) to promote Chinese exports; 3) to develop and improve R&D through the support of technologies from advanced countries and 4) to make Chinese companies more competitive by the incursion. 61. ZHANG D., FU G. and LIU Z. “Hainan, Yunnan and Guangdong State Farms’ Natural Rubber “Going Global” Strategy and Cooperation with ASEAN Countries” in China-ASEAN Relations: Economic Engagement and Policy Reform, 2009, Institute of China Studies, University of Malaya, Kuala Lumpur, P. 105-106; DAVIES K. (2013)“China Investment Policy: an update”, OECD Working Papers on International Investment, 2013/01, OECD Publishing, in http://www.oecd.org/china/WP-2013_1.pdf [accessed on June 2016], P. 35 62 MOFCOM People’s Republic of China, 2015 Business Review V: Stable and Rapid Development of Foreign Investment and Cooperation, January 11 2016, [consulted on February 5 2016] [http://english.mofcom.gov.cn/article/newsrelease/significantnews/201601/20160101235300.shtml 63 DAVIES (2013) OECD Ibid. P. 40 64 See “Circular of the State Administration of Foreign Exchange of the People’s Republic of China, on Foreign th Exchange Policy Adjusting on Some Overseas Investment” August 30 2006, MOFCOM; and 10 Five-year Plan, http://www.gov.cn/english/2006-04/05/content_245624.htm [accessed on August 3 2016], both in Appendix A.. 30.

(31) in single ownerships, joint ventures, cooperative enterprises, mergers & acquisitions, holding shares, injecting capital and permute stocks with firms from abroad65. Author Jie Yu remarks the three types of Chinese firms that take part in the outwards investments: the first is its own Sovereign Wealth Fund (SWF) China International Investment Corps (CIC), in charge of approval and support the finance of investment projects that go abroad; the second is the Stateowned Enterprises, highly connected to government officials; and the third are the Large Privateowned Companies, managed by its own director boards and not link to the government for decision-making66. Different private-sector chambers of commerce also issue other types of guidelines for Chinese enterprises, like Metals, Minerals and Chemicals or Foodstuff and Native Produce, that regulates business practices and the start stage of projects seeking for resources abroad like mining and palm oil67. But the main problem with this Guidance Catalogue is its limitation only to stipulate the type of economic sectors Chinese companies can invest in, as well as the restricted and prohibited sectors, but does not give any advice or recommendation on challenging issues and conflict topics like labor conditions or managerial practices while in other countries. In the same way, The Ministry of Commerce also issues a list of China’s Qualified Overseas Contractors, with 4195 companies listed as registered. In this document, one of the parts –the scope of businessspecifies for all companies that are appointed to start foreign projects that: “2. dispatching. 65. th. th. See Abstract of the 11 Five Year Plan outline and 10 Five Year Plan (Appendix). Also, VOSS Hinrich, The determinants of Chinese Outwards Direct Investment, 2011, UK, Edward Elgar Publishing, p. 79 66 YU, Jie (Cherry), Firms with Chinese Characteristics, Pp. 32-34. 67 China Chamber of Commerce of Foodstuffs and Native Produce (CFNA) Guide for Overseas Investment and Production of Sustainable Palm Oil by Chinese Enterprises, Oct 2015, in http://www.rt13.rspo.org/ckfinder/userfiles/files/China%20SPO%20Guide-PRODUCTION-Version%203_0RT13_ENG.pdf ; China Chamber of Commerce of Metals, Minerals & Chemicals, Guidelines for Social Responsibility in Outbound Mining Investments, 2014, in http://www.cccmc.org.cn/docs/2014-10/20141029161135692190.pdf [both consulted on May 17, 2016]. 31.

(32) necessary contract workers to implement the above-mentioned foreign projects.”68, which seem to be a. implicit agreement from the government to let the open door to companies to take their own workers in the project being undertaken abroad. 4.4. 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].. 32.

(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 smallscale, 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. 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] 72. 33.

(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. 34.

(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/wpcontent/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.. 35.

(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]. 36.

(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. United 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-SSC2015%20report%20on%20the%20sustainable%20development%20of%20chinese%20enterprises%20overseas.pdf [consulted in June 2016], P. 51 and “Chinese are coming: part 1” in BBC 87. 37.

(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 them 89. 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-deadlyriot-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-amidrising-nationalist-sentiment/3097719.html [consulted on Dec 12 2015]. 38.

(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. 5.2. Turmoil in May 2014 and visit of Xi JingPing in Nov 2015 However, on May 1st 2014 occurred after the deployment of an oil rig by the China National Offshore Oil Corporation (CNOOC), in the waters near the Paracel Islands, and lit up the rage on Vietnamese, on the context of a long limitation dispute for the South China Sea borders among Vietnam and many Southeast Asian countries with China92. After that, many Chinese and Taiwanese factories and industrial parks were burned; 21 Chinese citizens were killed and nearly a 100 injured by angry locals in different regions of the country93, to the point that ships arrived from China at the coastal province of Ha Tinh in order to rescue. 90. ZHAI Qiang China and the Vietnam Wars 1950-1975, 2000, University of North Carolina Press, P. 7; WOMACK B. China and Vietnam: The Politics of Asymmetry, 2006, Cambridge University Press Pp. 26-27. 91 WEATHERBEE, D. “The Cold War in Southeast Asia”, in International Relations in Southeast Asia¸ 2005, UK, Oxford, Rowman and Littlefield Publishers Ibid. Pp. 82-83. 92 There is much documentation about this topic and for purposes of research limitation; there will not be further in- depth discussion about it. 93 “At least 21 dead in Vietnam anti-China protests over oil rig” in The Guardian, May 15 2014, http://www.theguardian.com/world/2014/may/15/vietnam-anti-china-protests-oil-rig-dead-injured [consulted on April 17 2015]. 39.