While China remains Vietnam’s largest rice buyer, industry insiders say it is a highly precarious market, especially when it comes to payment and market stability.
Vietnam exported only 250,000 metric tons of rice to China in 2011, but the figure jumped to more than three million metric tons in the following two years, according to the Vietnam Food Association (VFA).
In the year to July, China also accounted for 40 percent of the total rice exports of the Southeast Asian country, most of which were exported through cross-border rice shipments, the VFA said.
Cross-border trading is a legal international economic activity among people of two neighboring states. The products are usually traded in small volumes and values, and require less paperwork than the official trading activities.
While China is not a demanding importer, as it is willing to accept even the lowest-quality rice, experts said this could turn into a dangerous disadvantage for Vietnamese rice businesses.
“As China does not ask to buy high-quality rice, Vietnamese businesses are not pressured to increase the quality of their products or build up their reputation,” Dr. Ho Cao Viet, with the Southern Fruit Research Institute, said.
“Therefore, when China ceases imports, Vietnam could not sell such poor-quality rice to any other markets.”
Another risk lies in the payment method, industry insiders have warned.
The director of a rice exporting firm in the Mekong Delta province of An Giang said most Chinese importers only pay 20 percent of the contract value in advance, and the rest is cleared only after they have received shipments.
“The Chinese traders will be unable to complete payment if they fall into trouble,” the Vietnamese businessman, who asked to be named only as T., said.
Cross-border rice exports could be seized by Chinese customs and market watchdog agencies at any time, and Chinese partners “would have no money to pay for Vietnamese businesspeople,” T. warned.
It was reported in mid-August that China would prohibit rice imports via the border with Vietnam, but T. said cross-border rice imports are only tightened, not completely banned.
“So business is still going on, though it has become tougher than before,” he said.
T. said Chinese traders still prefer importing rice across the border to doing so via the official channel, pointing the finger at a huge price disparity.
Vietnamese five-percent broken rice currently sells at US$460 a metric ton, and under the official import method, Chinese traders will have to pay $620 a metric ton, with all taxes and fees included, he elaborated.
Dr. Viet, the pundit from the Southern Fruit Research Institute, said cross-border trade with China is messing up the Vietnamese rice market, as well as other agricultural products.
“Chinese traders are willing to buy at high prices when they badly need rice, but prices will fall sharply when they stop purchasing,” he said.
The researcher suggested that Vietnam ban cross-border rice exports to China to spare time for the rice sector to “focus on increasing rice quality, diversifying markets, and building reputation.”
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