Vietnam cautious as China increases rice imports

Vietnam cautious as China increases rice imports

China has become the largest importer of Vietnamese rice this year to date with a record turnover, but local exporters remain cautious against the market, especially in regards to payment.

“We don’t know how much China will continue importing in the future, and when they will cease purchases, so local exporters should be careful,” the Vietnam Food Association (VFA) warned in a statement.

In the year to July, Vietnam shipped a total of 4.73 million tons of rice to global markets, reaping more than US$2.1 billion in revenues, according to the General Customs Department.

China has accounted for 28.3 percent of the total export turnover, or 1.34 million tons, a shipment valued at $570 million. This is 5.2 times higher than the figure recorded in the same period last year, which was only 257,000 tons.

“China has the demand for rice imports due to the impact of bad weather in many of its areas,” said VFA deputy chairman Pham Van Bay in explaining the unexpected increase of rice exports to China.

Rice is being exported to China under a free market mechanism, which means any local qualified exporter is allowed to sell rice to Chinese customers, according to VFA.

Meanwhile, Nguyen Dinh Bich, from the Institute for Market Research, said that the increased imports arose from the fact that rice prices in China have soared by 7 to 19 percent compared with last year.

“China’s domestic rice prices now stand around $400 a ton, while in Vietnam the rate is only $260 a ton. So it is no surprise that Chine traders have rushed to buy from Vietnam,” said Bich.

Stay cautious

Despite the increased amount of rice shipped to China, local rice businesses as well as management authorities do not yet know what the real demand of their largest customer is.

“Chinese traders appear secretive when it comes to their buying demand, so local exporters do not know how to develop their business plan,” said Bay from VFA.

Earlier, VFA chairman Truong Thanh Phong also warned local businesses to stay “extremely cautious” when signing contracts with Chinese customers, and focus on the payment method.

“Exporters should not ship the products when they have yet to receive payments and receipts from the Chinese partners,” advised Phong.

He added that Vietnamese businesses should try not to become involved in disputes with the Chinese traders, as “it is impossible to file a lawsuit in case you suffer business risks with Chinese partners.”

Earlier this year some Chinese traders asked local exporters to mix 5 percent broken rice and aromatic together, and sell at the exporting price of the latter to earn profits, a move VFA said was extremely dangerous as it could have destroyed the reputation of Vietnamese rice.

“We would have lost the Hong Kong and Chinese markets if that action had not been stopped in time,” the association said.

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