Escalating tensions around the South China Sea are a big concern for apparel and footwear firms

Escalating tensions around the South China Sea are a big concern for apparel and footwear firms

Escalating anti-Chinese protests by thousands of workers in Vietnam have led to the suspension of production at a number of Chinese and Taiwanese garment and footwear plants in Binh Duong province in the south of the country.

The demonstrations began peacefully at the weekend against China's deployment of an oil rig in a disputed area in the South China Sea that both countries claim as sovereign territory.

But protests have turned increasingly violent, with a number of foreign companies broken into and set on fire, resulting in damage to some factories and their warehouses.

Around 100 workers from Taiwanese invested company Thong Dung Footwear took part in a rally on Monday night (12 May) and were joined by 8,000 workers from the plant on Tuesday morning.

Another 5,000 workers from the Chinese invested garment plant Far Eastern Apparel Company, which is based at the Vietnam-Singapore 1 Industrial Park, have also taken part in the protests.

In addition, reports say that some Li & Fung suppliers in Vietnam have suspended production as a precautionary measure, and that shoe maker Yue Yuen Industrial Holdings also halted production in the country today (13 May). Yue Yuen also suffered disruption last month after thousands of its workers in China went on strike to demand better social benefits.

The Singaporean Ministry of Foreign Affairs confirmed that protests have broken out at the Vietnam-Singapore Industrial Parks (VSIPs) I and II in Binh Duong, and that a number of foreign companies have been broken into and set on fire.

It is calling on the Vietnamese government to "act immediately to restore law and order in the two VSIPs before the security situation worsens and investor confidence is undermined."

The US Department of State has also described China's decision to set up the oil rig near the Paracel Islands, accompanied by a flotilla of government vessels, as "provocative," and an act that "raises tensions."

"This unilateral action appears to be part of a broader pattern of Chinese behavior to advance its claims over disputed territory in a manner that undermines peace and stability in the region," it said.

Disruption to imports
A report released earlier this year highlighted concerns that escalating local tensions around the South China Sea could impact footwear - and apparel - imports into the US.

The Footwear Distributors and Retailers of America (FDRA) pointed out that, with more than 95% of footwear shipped into the US coming through the South China Sea, continued skirmishes could have "major implications" for speed to market and transit costs.

It said that insurance rates could "skyrocket" thanks to the increased risks posed by growing nationalism and expanding regional navies.

As well as having a major effect on speed to market for footwear, impacts on shipping lanes in the southern part of the sea could hinder China from obtaining the oil required by cargo ships, with even a slight shortage likely to cause disruption, it added.

Meanwhile, other countries in the region, such as Vietnam and Indonesia, could be prevented from crossing the sea altogether.

With China responsible for 84% of US footwear imports, and Vietnam and Indonesia's business growing fast, the FDRA warned that now was a "critical time" in the history of global footwear production and sourcing.

It added: "With the continued reshuffling of footwear sourcing throughout the region, conflict in the Sea, both large and small, could have a substantial impact on costs, delivery, and quality."

With additional reporting by Ngo Tuan.