New Investment Wave of Chinese Enterprises Through M&A

Chinese investors are promoting activities such as invest and set up business in Vietnam. In particular, they are increasing their presence in Vietnam through M&A activities, especially in the real estate sector.

Sharing with Chinese businesses attending the recent conference about opportunities to invest in Vietnam, Mr Chen De Hai – Consulate General of China in Ho Chi Minh City said that since 2016 until now, the investment capital of Chinese enterprises into Vietnam increased sharply, production capacity is expanding, and the number of large investment projects are increasing.

No specific information on where these projects are invested, but Mr. Chen De Hai said that the investment portfolio is quite diversified and the investment capital of many projects is not small. There are projects ranging from several hundred million to more than 2 billion USD and investment in areas such as thermal power, wind power, solar cell production, textiles, tire production…

According to data from the Foreign Investment Agency (Ministry of Planning and Investment), in 2017, China’s committed investment capital ranks 4th among countries and territories investing in Vietnam. This is a very new development because in the past few years, China has rarely been in the top 5 foreign investors with large amount of investment capital into Vietnam.

2017 also recorded many M&A transactions of Chinese enterprises with partners in Vietnam in the field of real estate.

However, there are indications showing that not only investment through M&A and focus only on real estate, but Chinese enterprises will increase investment in manufacturing in Vietnam.

It is known that the investment activities of enterprises in the field of textile, fiber and leather footwear are in the roadmap to adjust the industry policy of China and are encouraged to invest abroad.

Meanwhile, Chinese businesses want to invest in Vietnam to take advantage of tax incentives when exporting to the US market or European countries because Vietnam has signed many free trade agreements with these countries.

A demonstration of this move is that the Bank of China – Ho Chi Minh City Branch, and Shenzhen Securities Information Co., Ltd (under Shenzhen Stock Exchange) in December 2017 has signed a contract in order to promote the attraction of Chinese investment capital into Vietnam.

According to many analysts, China’s new wave of investment in such manufacturing sectors as steel, textiles, fiber, furniture…, is a story that can happen in the near future.

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Invest in Real Estate of Vietnam in 2016?

The real estate market in 2016 will continue to recover. Vietnam real estate sector had signs of recovery in late of 2013 and lasted until 2015. Up to now, there were not any signs showed that development flow will be slowed in 2016.

In general, as recorded, real estate price is increasing and the actual increase amplitude ranging from 5 – 15%, certainly not with every market segment and every project. According to experts, the price increasing is also consistent with the rule that the market is starting to come up from the bottom but not yet peaked.

If we look at the profit of the real estate businesses in 2014, businesses that operated efficiently in 2014 have achieved profit in the range of 5 – 15%. In 2015, the number has increased to 15 – 20%. However, a common project construction time is about 3 – 4 years so the profit margin is not too high. Compared with the period of the real estate bubble, this is still sustainable growth rate.

Also in 2016, the property was evaluated as a safe investment channel and promising to create added value. If the national economy continues to grow, along with a series of extensive integration opportunities that we are, can hope 2016 will form the opportunity to create added value for real estate Vietnam.

The important thing is the final price when reaching home buyers is still in the acceptable range. According to the real estate consultants, if buyer has financial capability, they should buy or invest in real estate right now because the price in the next year is likely to rise.

In 2016, real estate is evaluated as a safe investment channel and promising to create value added. If the national economy continues to grow along with a series of extensive integration opportunities that Vietnam had, it is hoped that 2016 will form many opportunities to create value added for Vietnam real estate market.

When investing in real estate market at this time, investors can easier to buy at cheaper price and more options. Market supply is abundant only with the apartment segment with prices more than 20 million VND/m2, while the segment with prices below 20 million VND/m2, there are not enough houses to sell to buyers.

There are many projects that products are sold out within a month. Hence, small and medium class segments are having greater certainty and especially never being affected by the financial crisis. It also demonstrates two issues: consumer confidence has begun to return to Vietnam real estate market and real estate market of Vietnam always have really secure segment.

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Please click here to learn more about ANT Consulting or contact our lawyers and consultants in Vietnam for advice via email ant@antconsult.vn or call our office at +84 28 3520 2779