South China Sea: why China’s business interests in Vietnam are at stake amid nine-dash line controversies
- Controversies over Beijing’s nine-dash line claim in the South China Sea highlight how geopolitical tensions can challenge international businesses
- Although the economic implications may be minimal presently, businesses should be mindful of potential risks posed by the issue in the future
As a result, Vietnamese authorities are investigating the issue while many Vietnamese social media users have called for a boycott of the concert. In response to the backlash, IME Entertainment quickly shut down its website and its CEO apologised to the Vietnamese public.
Additionally, maps, globes, books, and mobile games carrying such images have been outlawed in the country. In 2020, the Vietnamese government put out a decree permitting the confiscation of publications that feature the nine-dash line and fining their publishers.
The line, which has been depicted in Chinese passport pages since 2012, has also posed obstacles to firms from China investing in Vietnam.
Vietnamese authorities have refused to accept Chinese passport holders as legal representatives of companies in Vietnam, for example, leading to delays in applications to set up companies. As the legal representative typically plays an important role in dealing with local authorities and signing off on key company documents, using proxies for the position is undesirable.
Authorities in Hanoi have reportedly been rejecting applications for work permits and police clearance certificates from Chinese nationals with passports displaying the nine-dash line map since late 2019.
More importantly, China’s repeated aggressive actions to enforce its nine-dash line claim have given rise to anti-Chinese sentiment in Vietnam.
These examples show that China’s assertiveness in the South China Sea and its nine-dash line claim have had a detrimental impact on Chinese companies in foreign markets. This has caused Chinese investors to be wary of investing in Vietnam, which could partly explain China’s relatively low investment in the country.
By March, despite the proximity of the two countries and Vietnam’s increasing appeal to foreign investors, China ranked only sixth out of all foreign direct investors in Vietnam in terms of cumulative registered capital, with 3,651 projects worth US$23.85 billion. South Korea, which does not have any territorial or maritime dispute with Vietnam, ranked first, with US$81.5 billion worth of investments.
Businesses operating in Vietnam must comply with the country’s policies or incur losses due to product bans. This poses a dilemma for international companies, as many have far greater business interests in China, leading to pressure to comply with Beijing’s maritime claims by including the nine-dash line in their relevant products.
Some companies have so far accepted sacrificing their business interests in Vietnam in order to satisfy Beijing and protect their commercial concerns in the Chinese market.
Should Washington and its allies seek to enforce the 2016 ruling to counter Beijing’s unlawful claims in the South China Sea, it is likely that companies that choose to submit to China’s pressures will suffer immense losses in other markets.
Controversies surrounding Beijing’s nine-dash line claim in the South China Sea have highlighted geopolitical tensions that can create challenges for international businesses.
Although the economic implications of the issue may be minimal presently, businesses should be mindful of the potential risks posed by it in the future. They should, therefore, seek to navigate the tensions and deal with the nine-dash line issue in a more prudent manner, including by removing the line from their products that they sell in markets outside China.
After all, supporting an unlawful claim could lead to severe financial losses and irreparable reputational damage for them in the long term.