Vietnam Boosts Forces in Province After Anti-China Protests

May 14, 2014 11:17 pm ET

(Updates with analyst comment in 23rd paragraph.)

May 15 (Bloomberg) -- Vietnam said the security ministry has moved to restore calm in a southern province where anti- China rallies sparked by the placement of a rig in disputed waters damaged factories and left one person reportedly killed.

The property of foreign companies was destroyed in protests in the province of Binh Duong that began May 13, Vietnam’s government said in a posting on its website. The Ministry of Public Security increased forces in the area and the situation has stabilized, the government said in the posting dated yesterday.

Officials will talk to people to let them know they can protest to “express their patriotism in peaceful ways,” as long as they don’t “let bad people take advantage and complicate the situation,” it said.

China’s move to place the rig in contested waters near the Paracel Islands also claimed by Vietnam set off rallies in major Vietnamese cities last weekend and demonstrations in factory parks where foreign companies operate. Those protests turned violent prompting Taiwanese companies with factories in Vietnam to halt operations. A Chinese national was killed in a riot at a Taiwanese mill, Associated Press reported, citing a Taiwanese official it did not name.

With China, Singapore and Taiwan calling for Vietnam to protect their citizens in the country and China telling workers to limit outdoor excursions, Vietnam detained hundreds of protesters for questioning. The country is a hub for clothing and other factories and China is one of its major trading partners.

Multiple Invasions

“Every Vietnamese knows that China has invaded Vietnam multiple times over the centuries, and therefore it’s in their DNA to be upset about what’s happening with the oil rig, but you can’t join in the global supply chain and allow these kinds of things to happen,” said Murray Hiebert, a Washington-based senior fellow at the Center for Strategic & International Studies.

“Feeling compelled to stand up to China is one thing, but letting this kind of popular sentiment run amok is pretty dangerous for Vietnam,” Hiebert said in a telephone interview yesterday.

Taiwanese companies with factories in Vietnam halted operations, with some citing damage to plants from the protests. One person was slightly injured and more than 200 Taiwanese people took refuge at a hotel in Binh Duong yesterday, according to Chen Bor-show, director general of the Taipei Economic and Culture Office in Ho Chi Minh City.

Violence Unexpected

This week’s disturbances followed peaceful demonstrations against the rig on May 11 in Ho Chi Minh City and Hanoi.

The outbreak of violence targeting Chinese was not “what the authorities wanted, or foresaw,” said Martin Stuart-Fox, an emeritus history professor at the University of Queensland in Brisbane, Australia. “The Vietnamese authorities walk a fine line when they permit anti-Chinese demonstrations,” Stuart-Fox said by e-mail.

Formosa Chemicals & Fibre Corp.’s Vietnam unit halted operations and is assessing damage, the company said in a statement yesterday to the Taiwan Stock Exchange. Kenda Rubber Industrial Co., Headway Advanced Materials Inc., Sanitar Co. Ltd., Advanced International Multitech Co., and Yung Chi Paint & Varnish Manufacturing Co. were among those announcing temporary closures.

Shares Decline

Tainan Spinning Co. said today it would continue a production halt at its Vietnam unit. Hong Kong-based shoe maker Yue Yuen Industrial Holdings Ltd. said it has suspended operations in Vietnam as a safety precaution, with no property damaged and its workers unharmed.

Advanced International said its plant suffered damage and items were stolen on May 13 after an anti-China demonstration. Formosa Taffeta Co. said the office building and computers of its Vietnam unit were damaged by intruders on May 13.

Tainan Spinning shares fell 2.3 percent as of 10:54 a.m. in Taipei, after declining 2.8 percent yesterday. Sanitar shares were down 0.9 percent after a 5 percent drop yesterday, and Advanced International fell 1.2 percent, having slipped 1 percent yesterday. Taiwan’s benchmark Taiex Index was 0.2 percent lower.

Protesters looking at company names were “just trying to find a Chinese word. It includes Korean, Japanese factories.” said Bob Hsu, general manager of Taiwan’s Great Super Enterprise Ltd., which temporarily closed its garment factories in Dong Nai. “I am worried, so we are destroying any Chinese words in the logo.”

Protesters Detained

Police are holding almost 500 people for questioning over damage to property in Binh Duong, according to Mai Cong Danh, deputy chief of the province’s police.

Protesters targeted the Vietnam-Singapore Industrial Park and other factory parks in Binh Duong on May 13, “specifically manufacturing companies that are owned and/or managed by Chinese as well as Chinese expatriates working for other companies,” the industrial park said in an e-mailed statement.

“The protesters set fire to three factories,” it said. About five companies’ factories were damaged by fire, according to Danh from Binh Duong police.

Singapore called in Vietnam’s ambassador to the country to voice concerns over the protests, according to a statement from the foreign ministry yesterday.

“Singapore views this issue very seriously given our close economic cooperation with Vietnam,” the ministry said. The government has “requested the relevant Vietnamese authorities to restore order urgently.”

‘Act Responsibly’

Taiwan has expressed “serious concerns” to Vietnam about the safety of the estimated 40,000 Taiwanese business people in Vietnam, Foreign Affairs Ministry spokeswoman Anna Kao said by phone.

“They have promised to do their utmost to help foreign investors, including our citizens,” Kao said. Once the situation has stabilized, Taiwan has asked the Vietnam government to “act responsibly by looking to compensate our business people,” she said.

Taiwan also has claims in the waters, and has taken a non- confrontational approach, according to Shelley Rigger, a professor of political science at Davidson College in North Carolina who studies relations between Taiwan and China. “Taiwanese have got nothing to do with the catalyst of these demonstrations,” she said. “The oil rig is all about China.”

‘Kind of Shocking’

Taiwanese companies have invested in Vietnam in part to avoid being too reliant on China, she said.

“They wanted to diversify. In a way Vietnam’s gain has been China’s loss. For Taiwanese investors to be punished for making that move is kind of shocking.”

China is taking action to protect its citizens in Vietnam, Foreign Ministry spokeswoman Hua Chunying said yesterday in Beijing.

“We urge the Vietnamese side to immediately take necessary steps to stop these activities and seriously punish crimes to ensure the security of Chinese citizens and institutions in Vietnam,” Hua said.

Vietnam and China fought a border war in 1979, with ties normalized in 1991. Vietnamese history over the last two thousand years has been characterized by Chinese incursions into what is now Vietnam’s territory, and many city streets are named after heroes from those conflicts.

--With assistance from John Boudreau in Hanoi, Yu-Huay Sun in Taipei, Sharon Chen in Singapore, Edmond Lococo in Beijing and Liza Lin in Shanghai.