As the violent protests and riots in Vietnam affect the country’s social harmony, the business climate is also being seriously impacted. Anti-Chinese riots erupted in Vietnam on Tuesday after the Chinese government placed an oil rig in disputed waters between the two countries, and by Thursday the riots had claimed at least 21 lives. Following mass demonstrations, some Vietnamese protestors began to loot and destroy Chinese businesses, and as the rioting intensified, the protestors started to target all foreign owned businesses. Along with Chinese establishments, Taiwanese, South Korean, Japanese, and Malaysian companies have all reported damages from the riots, which threatens to continue as emotions are still running high throughout Vietnam.
The effects from the violence in Vietnam could have many implications on the country’s economy and business climate, which recently have been successful in attracting foreign investment. As costs began to increase for businesses in China, many looked to Vietnam as a cheaper alternative. The riots could bring a quick end to the flow of investment, significantly hurting Vietnam’s economy, which is heavily dependent on its neighbors. Vietnam’s GDP growth over the past year was greatly influenced by foreign investment according to analysts, which shows why anti-foreign sentiment could negatively impact the economy. If the protests continue and the rioting does not stop, many foreign companies could begin to pull out of the country, which in turn would greatly slow down the country’s economic growth.
The riots across Vietnam highlight the importance of research into current events and cultural issues in foreign countries. International businesses must look into these issues very closely before they invest millions of dollars, as social volatility can put their entire investment at risk. Being able to learn about and understand these social issues is extremely important in the study of international business, as companies look to avoid the problems social unrest can bring about.