VietNamNet Bridge – China has become the biggest rice export market for Vietnam, but it’s not easy to earn money from the market. Exporters have been facing high risks relating to the payment, pricing and contract cancelation.

64 percent of canceled contracts are from China

According to Nguyen Xuan Chien, Deputy Director of the Domestic Market Department under the Ministry of Industry and Trade, by April 30, 2013, Vietnamese enterprises had signed the contracts on exporting 4.2 million tons of rice, an increase of 9.92 percent in comparison with the same period of 2012. Vietnamese exporters would need to deliver 2.08 million tons from May under the signed contracts.

With the high volume of contracted exports, Vietnam will not have high inventories. However, high risks have been existing. The importers from China, the vast market which consumes 1/3 of Vietnam’s total rice exports, have been trying to force the prices down, or threaten to cancel contracts.

Truong Thanh Phong, Chair of the Vietnam Food Association (VFA), said in the first 4 months of 2013, China bought 1.6 million tons of rice from Vietnam.

“China is the biggest rice importer of Vietnam’s rice. And China is also the most risky market. Up to 64 percent of canceled contracts in the first 4 months of the year were the ones with China,” Phong said.

The director of a rice export company complained he has tasted a bitterness when doing business with a Chinese enterprise.

The Chinese partner ordered 10,000 tons or rice, with the payment to be made after deliveries. When the products docked at the destination ports, the partner, complaining about the quality, insisted on lowering the prices. The rice exporter, who fell into dilemma, had to sell the consignment of goods at a loss.

“China has become an important export market for Vietnam in the context of the world’s low demand. However, doing business with Chinese is like “playing with fire”. You may get burnt one day,” he said.

“Vietnam should not consider China as a strategic export market,” he added.

Vietnam’s rice exports to China in 2012 soared unexpectedly by 10 times over 2011, reaching 2.2 million tons. This did not include the 500 tons of exports through the cross-border channel.

The US has predicted that the country would have to import 3 million tons in 2014 to satisfy the domestic demand.

Chinese play tricks to force prices down

In 2012, VFA set up the Vietnam high grade rice export promotion center which aims to boost the high quality rice exports to the market through the official channel.

However, to date, China has not announced the official annual imports, which makes it difficult for Vietnamese enterprises to draw up their business plans.

Regarding the payment method, Chinese importers always want to pay after deliveries. The payment method has put Vietnamese exporters at a disadvantage, while Chinese importers hold the handle of knife and they may force the prices down.

Some exporters complained that Chinese businessmen met them and placed big orders, but they later… did not return to get deliveries as promised. When the exporters cried of the big amounts of unsold rice, did the Chinese businessmen turn up and offered to buy the rice at very low prices.

The Ministry of Industry and Trade, in an effort to reduce the reliance on the Chinese market, has told businesses to boost exports to Africa and the countries in the Central and South America. Vietnam exports to Africa in the first four months of 2013 increased by 22 percent.

SGTT