<html><head><meta http-equiv="Content-Type" content="text/html charset=us-ascii"></head><body style="word-wrap: break-word; -webkit-nbsp-mode: space; -webkit-line-break: after-white-space;" class=""><div style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;" class=""><a href="http://www.reuters.com/article/vietnam-china-trade-idUSL4N19Y2XQ" style="color: rgb(149, 79, 114);" class="">http://www.reuters.com/article/vietnam-china-trade-idUSL4N19Y2XQ</a><o:p class=""></o:p></div><div style="margin: 0in 0in 0.0001pt; font-size: 11pt; font-family: Calibri, sans-serif;" class=""><span class="timestamp">Sun Nov 6, 2016 | 6:00pm EST</span><o:p class=""></o:p></div><h1 style="margin-right: 0in; margin-left: 0in; font-size: 24pt; font-family: 'Times New Roman', serif;" class="">China firms eye 'Made in Vietnam' windfall - if Obama's TPP survives<o:p class=""></o:p></h1><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">* Chinese manufacturers seek trading base in Vietnam<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">* Vietnam's FTAs give Chinese firms new trade options<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">* TPP's political survival in question<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">By My Pham<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">HO CHI MINH CITY, Nov 7 From textiles and shoes to paper and furniture, Chinese manufacturers are pouring investments into neighbouring Vietnam, hoping to ride on the coattails of the Southeast Asian country's pending trade blitz.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Vietnam's Free Trade Agreement (FTA) with the European Union, signed last year, and the Trans Pacific Partnership (TPP), if it clears significant political hurdles in the U.S., would collectively give the country access to markets worth $44 trillion in combined gross domestic product.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Even as doubts linger over the future of U.S. President Barack Obama's TPP once he leaves office, early moves by China Inc to leverage off Vietnam's lower factory wages - about a third that of China's - show a re-centering of the world's factory activity.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Importantly, a base in Vietnam gives Chinese manufacturers access to trade agreements of which China is not currently a part.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">"So far this year, I've had more than 30 Chinese wood companies coming to me for consultation," said Nguyen Ton Quyen, who heads Vietnam's Timber and Forest Product Association.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">"There's a considerable amount of Chinese wood furniture firms moving their investments to Vietnam, to enjoy tax incentives."<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Chinese inflows into Vietnam in 2015 doubled from a year earlier to $744 million and 80 percent of that was in the second half of the year, just after Vietnam signed the EU FTA and the TPP.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">In the first nine months of this year, investments from China quadrupled to $1 billion compared with the same period in 2015.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Vietnam has numerous other free trade agreements, including with top investor South Korea, supporting resident giants like Samsung and LG. As a part of the Association of Southeast Asian Nations, it also enjoys free trade with other members of the 10-nation zone, plus the various bilateral agreements the bloc has with other economies, like China.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Nguyen Chien Thang runs a furniture factory and is also feeling the Chinese surge. He estimates a third of the approximately 500 foreign-owned wood processing firms in Vietnam are from China and Taiwan, adding to competition for his Scansia Pacific, a supplier for Swedish giant IKEA.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">"Tax rates here are also much more favourable," said Thang. "Labour costs in their mainland are getting much higher."<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">MANUFACTURING MUSCLE<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Much of the investment is going into Vietnam's textile industry, the second biggest garment exporter to the U.S. after China, supplying brands such as Nike, Adidas, Zara, Armani, and Lacoste.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">The U.S. Department of Commerce projects U.S. imports of textile and apparel from Vietnam to jump 45 percent to $16.4 billion by 2025 from 2015 while such imports from China are expected to tumble 45 percent to $23.7 billion.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Vietnam's trade agreements with TPP and the EU require textile manufacturers source their own yarns, dyes and fabrics locally or from within the respective trade blocs.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">For Chinese firms in Vietnam, this means securing access to local supply chains. To prepare for TPP, Chinese textile group Texhong Textile is building a $450 million industrial park in northern Quang Ninh province, with an additional $640 million for supporting industries.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">To be sure, this year's U.S. presidential campaign has cast deep doubts over the TPP. Before last year, TPP approval on Capitol Hill looked highly likely, but now neither candidate is willing to support a deal that could have implications for U.S. jobs.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Donald Trump has called the TPP a "death blow" for U.S. manufacturing, while rival Hillary Clinton appears to have backtracked on her previous advocacy for the TPP while serving as Obama's Secretary of State.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">While U.S. political noise has created anxiety for those invested in Vietnam, there are hopes Clinton might change her tune on TPP or seek an alternative version of it if she becomes president, in contrast to Trump's more stridently protectionist policies.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Amid the uncertainty, Vietnam's ruling party has taken the ratification of the TPP off its agenda this year.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">"Vietnam so far hasn't shown a clear opinion on the two candidates ... but Vietnamese people have shown clearly that they want Hillary Clinton to win," said economist and former government advisor Le Dang Doanh.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">SURPRISING CONSEQUENCES<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Even with the TPP in doubt, Chinese firms are looking to leverage off Vietnam's clout as an emerging industrial and trade power.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Ironically, deals like TPP, Obama's signature trade policy intended to boost American influence in Asia and challenge that of China, have actually encouraged Chinese engagement.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Rising investment from China is also changing Vietnam in other ways.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">Anti-China sentiment is entrenched in Vietnam, shaped by centuries of perceived Chinese bullying and sustained by recurring wrangles over sovereignty in the South China Sea.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">But there are signs Vietnamese are putting nationalist ideals aside and are learning Chinese, in the hope of getting jobs offered by China Inc and swarms of Taiwanese investors.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">In the sprawling industrialised province of Binh Duong, China and Taiwan are bringing huge job opportunities, with the two countries accounting for a third of over 100 new investment projects announced in the first five months of 2016.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">"I don't like China, or Chinese, but their firms are coming here more and more," said Minh Anh, a university student who juggles Chinese classes at night with university lectures and a part-time job by day.<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">"Speaking Chinese may widen my job opportunities and help me earn a good job with good benefits."<o:p class=""></o:p></p><p style="margin-right: 0in; margin-left: 0in; font-size: 12pt; font-family: 'Times New Roman', serif;" class="">(Additional reporting by Yawen Chen in BEIJING; Editing by Martin Petty and Sam Holmes)</p></body></html>