Last update 6/12/2012 10:37:00 AM (GMT+7)

Officials tell businesses keep cautious when making deals with Chinese

VietNamNet Bridge – Recently, the Chinese partners have continuously broken contracts, making Vietnamese rice exporters suffer, thus indirectly forcing the domestic prices down.

Chinese people farm fish in Vietnamese Cam Ranh bay

China has emerged as the biggest rice importer of Vietnam since the beginning of the year, which has imported the rice volume higher by 4.4 times than that of the same period of the last year, according to the Ministry of Agriculture and Rural Development (MARD). However, recently, the Chinese partners have continuously broken signed contracts.

Vo Hung Dung, Director of the Can Tho City branch of the Vietnam Chamber of Commerce and Industry VCCI: the Chinese market is unstable.

A lot of rice export companies, both privately run and state owned have complained that Chinese have repeatedly broken contracts. What would you say about that?

Dung: This is the commonly seen way the Chinese have been doing trade with Vietnam. At first, Chinese merchants buy goods in big quantities and place big orders. Vietnamese farmers and enterprises feel very satisfied when they can sell goods to China at high prices, while they do not realize that Chinese merchants never open a L/C (letter of credit).

After a period of collecting goods, they would suddenly stop collecting goods, especially when Vietnamese enterprises have a profuse supply. This could be a trick used by Chinese merchants, or they stop collecting goods simply because they have had sufficient goods.

As you may know, in 1995-1996, a lot of rubber and rice exporters lost their lives when doing business with Chinese. In some cases, Chinese importers accept to open a L/C. However, Vietnamese businesses may easily fall into their traps because of some “spider” phrases. What I can say is that China is not a stable market.

Pham Thai Binh, Director of Trung An Company Ltd: High risks latent in the Chinese market

Vietnamese enterprises carry rice to China to deliver under the signed contracts. However, the Chinese partners refused the deliveries, thus making Vietnamese companies suffer. Why?

Binh: Most Vietnamese enterprises sell rice to China under the mode of FOB, which means that the Chinese partners take care for shipping and bear freight. Of course, Vietnamese exporters want to undertake the shipping, because they can take initiative in controlling the quality of exports. Besides, if Vietnamese enterprises order shipping services, the shipping firm would issue bill of lading soon when making payment.

However, the Chinese partners do not agree, and since they lease containers, they can easily use trickery. Vietnamese enterprises would suffer if Chinese refuse deliveries, because they do not have bill of lading to complete the payment vouchers.

When you do business with Chinese, you should foresee the risks.

Do you think that Chinese want to exploit the current situation to force the prices down and they would only buy rice when the prices go down further?

Some enterprises have asked me to buy rice from them, because their inventories are too big. Chinese have not stopped collecting rice absolutely; they still keep buying if the prices are good.

In general, you should not expect that Chinese would follow any rules or laws. You should understand that you face very high risks when doing business with Chinese.

Some export companies now pay low prices to farmers, reasoning that Chinese partners break the contract, thus leading to high inventory volumes. What would you say about that?

Nguyen Tri Ngoc, Head of the Cultivation Department under the Ministry of Agriculture and Rural Development: I still cannot check the information. However, if this happens, I think to some extend, VFA is unfair to farmers.

In some Mekong Delta’s provinces, farmers have begun harvesting the summer-autumn crop. The IR 50404 rice is selling at 5000 dong per kilo. However, since Vietnam is meeting difficulties in exporting rice, it is highly possible that the rice in Mekong Delta would decrease.

Source: TBKTSG