Chinese businesses are now collecting Vietnam’s rice in large quantities, which has raised major concerns.
Professor Academic Tran Dinh Long, chair of the Vietnam Seed Association, has warned that Vietnamese businesses may fall into the Chinese “trap” when trying to sell rice in bulk to China.
Many trade agreements have been signed with a selling price at VND7,500-7,600 per kilo for five percent broken rice, while the domestic price is lower, at VND7,400 per kilo.
“The higher price offered by Chinese businesses makes Vietnamese businesses happy. However, they should be skeptical when doing business with the Chinese,” Long said.
Observers noted that Chinese businesses that import Vietnam’s rice across the border can make fat profits.
If they import rice through official channels, they would have to pay $70-80 per ton more in taxes and fees.
Therefore, they would rather import rice across the border as they are exempted from taxes and fees. Though they have to buy at higher prices, they still make high profits.
And even if they accept to pay an additional $20-30 per ton, they still can save $40-50 for every ton of rice they buy.
“By raising the rice buying prices, Chinese importers harm Vietnamese businesses which specialize in exporting rice through official channels,” an observer noted.
“Once Chinese businessmen pay high prices for rice, they will push the market average price up,” he explained. “If so, Vietnamese enterprises exporting rice through official channels will have to raise their export prices, thus making Vietnam’s rice less competitive.”
“If Vietnamese enterprises cannot find buyers, they would have to sell rice to Chinese businesses to clear stocks,” he said.
Long said there were latent risks in exporting rice through unofficial channels.
The lack of transparency gives Chinese businesses the opportunities to lower prices by using various ploys.
Long said that such ploys had been used many times by Chinese businesses to push the prices down, thus making Vietnamese exporters and farmers suffer.
The Vietnam Food Association said that Chinese businesses top the list of trade partners who try to lower prices by “tricks” and cancel contracts.
In 2013 alone, 64 percent of rice export contracts were canceled by Chinese traders. They delayed the delivery schedules for other contracts and lowered prices.
Vietnamese enterprises still accepted to sell rice to Chinese at a loss, because they had already collected rice from farmers. They needed to sell rice as soon as possible because they did not have depots for storage.
Long warned that if Vietnam still relied on the Chinese market, it would have to suffer more heavily in the future because of sharp price falls.