* Factories attacked amid worsening Sino-Vietnamese ties
* Neighbours have rival claims in South China Sea
* China positions oil rig off Vietnamese coast
* Dozens of vessels nearby raise risk of escalation
(Adds French, U.S. reaction, details, colour)
By Ho Binh Minh and Manuel Mogato
HANOI/MANILA, May 14 Thousands of Vietnamese set
fire to foreign factories and rampaged in industrial zones in
the south of the country in an angry reaction to Chinese oil
drilling in a part of the South China Sea claimed by Vietnam,
officials said on Wednesday.
The brunt of Tuesday's violence, one of the worst breakdowns
in Sino-Vietnamese relations since the neighbours fought a brief
border war in 1979, appears to have been borne by Taiwanese
firms in the zones in Binh Duong and Dong Nai provinces that
were mistaken for Chinese-owned companies.
A police official in Binh Duong province, speaking by
telephone, said about 200 people had been arrested.
"We are working on other areas in the province ... We
haven't seen any injuries," the official said.
Photographs posted on social media sites and blogs,
purportedly of the aftermath of the violence, showed blackened
shipping containers, smashed windows and several burnt out
vehicles that had been overturned.
Some Taiwanese firms had spray-painted messages on the road
and across their gates saying "We Support Vietnam" in an effort
to distinguish themselves from Chinese enterprises.
The row over the South China Sea and anti-China violence in
tightly-controlled Vietnam have raised fears of an escalation in
tensions between the Communist neighbours.
"I fear a dark chapter in Sino-Vietnamese relations is now
being written," said Ian Storey, a South China Sea expert at
Singapore's Institute of Southeast Asian Studies.
"And because China wants to keep that oil rig in place into
August, these protests could just be the first pages."
Tran Van Nam, vice chairman of the Binh Duong People's
Committee, said around 6,000 workers initially held peaceful
protests on Tuesday, but order broke down when numbers swelled
to about 20,000. Gates were smashed and rioters set 15 factories
on fire, he said.
"This caused billions of dong (hundreds of thousands of
dollars) in damages and thousands of workers will have lost
their jobs," Nam said by telephone.
"We urge everyone to stay calm, exercise restraint and have
faith in the leadership of the Party and State."
"EVERYONE IS TERRIFIED"
F.Y. Hong, president of Taiwan's Formosa Industries Corp,
one of the firms to be attacked, said about 300 rioters looted
televisions, computers and personal belongings of workers.
"Due to the limited number of police, they couldn't stop the
looters. The situation was like in a country where there were no
authorities to protect its people," Hong said.
Malaysian-listed furniture manufacturer Latitude Tree
Holdings Bhd said its property was ransacked, forcing
factory workers to down tools. It did not know when operations
at the plant could resume.
"Everyone is terrified," said Serena Liu, chairwoman of the
Taiwan Chamber of Commerce in Vietnam. "Some people tried to
drive out of Binh Duong, but looters had put up road blocks."
A Singapore foreign ministry spokesman said the premises of
several foreign firms were broken into and set on fire in two
Vietnam-Singapore joint venture industrial parks in Binh Duong.
The United States said it was monitoring events in Vietnam
closely, and urged restraint from all parties involved. Taiwan's
foreign ministry was in talks with Vietnamese authorities to
ensure the safety of its citizens.
Storey said the Vietnamese government would now be under
increasing pressure to respond, which could risk a military
clash at sea with China that Vietnam could not win.
Dozens of ships from both countries are around the oil rig,
and the two sides have accused each other of intentional
collisions, increasing the risk of open confrontation.
Vietnam's former colonial master France urged "utmost
restraint" from all sides to defuse territorial tensions.
In Beijing, Foreign Ministry spokeswoman Hua Chunying told
reporters that China was seriously concerned about the violence
and had summoned Vietnam's ambassador to protest.
China has "demanded the Vietnamese side make efforts to
adopt effective measures to resolutely support eliminating
illegal criminal acts and protect the safety of Chinese citizens
and institutions", Hua told reporters.
Hong Kong-listed sports shoe maker Yue Yuen, which
supplies footwear to Adidas, Nike and other
international brands, said it had suspended production in
Vietnam because of the protests, but there was no damage to its
facilities and its workers were safe.
A spokesman for global exporter Li & Fung, which
supplies retailers like Kohl's Corp and Wal-Mart Stores
Inc with clothing, toys and other products, said some of
its suppliers in Vietnam had halted production on Wednesday as a
precautionary measure. He gave no further details.
PHILIPPINES POINTS FINGER
Anti-China sentiment was also on the rise in Manila, as the
Philippine government accused Beijing of reclaiming land on a
reef in disputed islands in another part of sea, apparently to
build an airstrip.
The spike in tensions over the oil- and gas-rich South China
Sea comes two weeks after U.S. President Barack Obama visited
the region and expressed support for long-time allies Japan and
the Philippines, both of which are locked in territorial
disputes with China.
Vietnam is also stepping up ties with the United States.
China claims almost the entire South China Sea, an area rich
in energy deposits and an important passageway traversed each
year by $5 trillion worth of ship-borne goods.
Brunei, Malaysia, the Philippines, Taiwan and Vietnam also
have claims on the area.
Philippine foreign affairs department spokesman Charles Jose
said China had been moving earth and materials to Johnson South
Reef, known by the Chinese as Chigua and which the Philippines
calls Mabini Reef, in recent weeks.
He said China was reclaiming land in violation of the
Declaration on the Conduct of Parties in the South China Sea, an
informal code of conduct for the region.
"I think they're to construct an airstrip there," Jose said.
However, Richard Bitzinger, a military analyst at the S.
Rajaratnam School of International Studies in Singapore, said
the airstrip was unlikely to be a strategic game-changer in the
South China Sea because of the difficulty in building a workable
runway on the atoll.
"It would be a nice tool to have in the box of options to
project power, but it is probably going to be far too small to
have a huge impact," Bitzinger said.
"At this point I would be very surprised to see this develop
into any airbase of any significant size ... China's holdings in
the Spratlys are just too small.
"It is probably as much a political move as anything else,
the laying down of one more marker to solidify their position
and continue their campaign of creeping assertiveness."
(Additional reporting by Nguyen Phuong Linh in Bangkok, Donny
Kwok and Greg Torode in Hong Kong, Faith Hung and Michael Gold
in Taipei, Rachel Armstrong in Singapore, Megha Rajagopalan and
Michael Martina in Beijing, John Irish in Paris and David
Brunnstrom in Washington; Writing by Raju Gopalakrishnan;
Editing by Mike Collett-White)