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Footwear factories operating in Vietnam halted production and shut their doors after anti-China protestors ransacked plants.
Vietnamese rioters looted foreign-owned factories as maritime tensions in the South China Sea continue to spill over into the business world.
“From our perspective, this is something that has been a concern for quite some time,” said Matt Priest, president of the Footwear Distributors & Retailers of America.
“This could quite possibly disrupt companies' ability to get product to market, clog shipping lanes and halt port activity, impacting the 2.3 billion pairs of shoes shipped to the U.S. each year,” he said, noting that the severity of the protests has increased at a rapid pace. “We went from the skirmishes possibly impacting the movement of goods to the direct impact of having footwear factories shut down because of the skirmishes.”
On a conference call with analysts and investors on Wednesday, Puma SE CEO Bjorn Gulden said the company closed its factories in the country the previous day due to political issues with China, but management did not speak to the potential impact of the situation on earnings.
Yue Yuen Industrial, the Hong Kong supplier of athletic shoes to Nike Inc. and Adidas AG, also has shut its factories in Vietnam, which last year accounted for 1/3 of Yue Yuen’s total production.
According to the FDRA, more than 95 percent of footwear shipped to the U.S. flows through the South China Sea, which means that continued clashes in the area will impact the industry in terms of speed to market and transit costs.
The original spark for protests is reported to be China’s deployment of an oil-drilling rig and fleet of coast guard vessels in disputed waters off the Vietnamese coast.
“China is flexing its muscle in ways we haven’t seen in quite some time, and an unintended consequence is it is impacting trade,” Priest said.
According to reports, the riots have left as many as 21 people dead and more than 129 injured.