Vietnam Factory Riots: The View From Hong Kong

How has the recent violence at factories in Vietnam—sparked by a rush of anti-Chinese sentiment—affected the attractiveness of the country for Hong Kong-based manufacturers?

The answer to that question varies widely, as these three views The Wall Street Journal collected show:

Reuters/Peter Ng

Huge blow to a promising location: Federation of Hong Kong Industries

In recent years, Vietnam has appealed to a growing number of manufacturers looking for places to site factories because its wages are a fraction of China’s.

Yet the riots—where hundreds of factories were damaged or burned, and at least two people were killed—could make some companies rethink locating in Vietnam and reconsider China if the violence continues, said Willy Lin, deputy chairman of the Federation of Hong Kong Industries, which represents 3,000 manufacturers, most with factories in China.

“This will have a great impact on what people think is the new pastureland,” said Mr. Lin. “Cost is one thing, but stability is more important.”

With wages rising throughout the region, and worker unrest becoming a problem from China to Cambodia to Vietnam, manufacturers feel like they have few good options.

“We just have to pray very hard,” said Mr. Lin. “Do we have to go to another continent to invest?”

Best leave it to the locals: Lever Style

Stanley Szeto, chief executive of Hong Kong-based Lever Style, which makes clothes for brands like Uniqlo and Nordstrom, said his company has only a handful of Chinese staff in Vietnam to provide technical support, monitor production, and inspect finished goods.

Most of Lever’s Vietnam-based manufacturing is contracted out to locally owned factories, and the manufacturer isn’t directly impacted by the riots, he said. That’s a big contrast to the experience of other manufacturers with factories in the affected region.

“The only thing we did was to ask our Chinese staff to leave Vietnam,” said Mr. Szeto. “However, I understand some Hong Kong-owned factories…aren’t so lucky as they are seriously hit. These incidents just further convince us that our strategy of outsourcing rather than building our own is the right one.”

We’re still optimistic: Crystal Group

Hong Kong-based Crystal Group, a manufacturer for brands including Abercrombie & FitchANF -2.88%, Victoria’s Secret, J.C. PenneyJCP -4.36% and Ann Taylor, has been expanding fast in Vietnam. As of 2013, they had 9,000 employees there, triple the 3,000 they had 3 years earlier. Their plants in the country make T-shirts, lingerie and sweaters.

It is also a big manufacturer in China, with 20,000 to 25,000 employees there, and has factories in Cambodia, Vietnam, Bangladesh and Sri Lanka.

Crystal said in a statement that the three factories are near the capital city of Hanoi, where there haven’t been reports of factory violence. The operations of those factories are “normal” and the company has been keeping in close touch with unions and local authorities to make sure it stays that way.

The company has implemented some “special precautionary measures” and is ready to take “additional emergency security actions” if needed, the statement says: “We remain optimistic in the outlook for investment in Vietnam, which has not been affected by the incidence.”

Source blogs.wsj.com