Vietnam Must Better Manage Trade Imbalance With China: Economist

2015-10-01
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A vendor sits at her stall full of Chinese-made consumer goods at Dong Kinh market in the northern Vietnamese town of Lang Son, on the Chinese border, Sept. 23, 2014.
A vendor sits at her stall full of Chinese-made consumer goods at Dong Kinh market in the northern Vietnamese town of Lang Son, on the Chinese border, Sept. 23, 2014.
AFP

Vietnam’s government is glossing over the country’s trade deficit with China and must do more to stem the growing influence of its northern neighbor over its financial system, an economist said Thursday.

Recent figures released by the General Statistics Office of Vietnam showed that Hanoi’s trade deficit with Beijing had reached U.S. $24.3 billion in the first nine months of 2015—and increase of more than 21 percent compared to the same period a year earlier.

However, the office claimed that when factoring in a surplus from other foreign markets, the deficit only had a U.S. $4 billion effect on Vietnam’s economy as a whole.

Bui Kien Thanh, a Hanoi-based economist, told RFA’s Vietnamese Service that the figures do not tell the full story of Vietnam’s trade relations with China.

“For our garment industry, we have to import a lot of material from China to fill contracts we signed in the U.S.,” Thanh said, adding that 80-90 percent of the materials needed for Vietnam’s footwear industry are also brought in from China.

“Vietnam needs to examine the trade system. We can’t continue bragging that we have a surplus of billions of dollars to the U.S. market … when in fact we are only exporting [goods to other countries] for China … We need to clarify this and craft policies accordingly.”

Exports from Vietnam totaled U.S. $120.7 billion in the first nine months of 2015, though slightly more than 70 percent of that figure was attributed to foreign direct investment (FDI) companies, which are based in other countries but hold a controlling stake in a business in the Southeast Asian Nation.

According to Thanh, the data shows Vietnam would not enjoy a surplus in other markets without the vast trade deficit with China that comes with its exports.

The government of Vietnam “has not done enough to manage trade with China,” he said, particularly in terms of illegal cross-border trade.

“We need to rebuild the system of people who are in charge of imports and exports—not only with China,” he said.

Vietnam’s trade deficit with China has increased in each of the last 10 years, and experts estimate the deficit will reach U.S. $35 billion for all of 2015.

Nationalism factor

Thanh’s call for better management of trade with China comes after Beijing’s deployment in May last year of an oil rig, HD-981, to waters off the Vietnamese coast claimed by both countries prompted a storm of anti-China protests in Vietnam. China withdrew the rig in July, citing bad weather and the completion of exploratory work.

Chinese detentions of Vietnamese fishermen in 2012 and 2014 have also stoked tensions, with both sides accusing the other of ramming vessels during confrontations in the South China Sea.

In addition to imports of machinery and materials, Vietnam also purchases many consumer goods from its northern neighbor, and a growing sense of nationalism has led many Vietnamese to call on their government to do more to counter China’s influence.

“Vietnamese are now dependent on Chinese goods as small as things like needles and thread,” Do Viet Khoa, a teacher based in Hanoi, told RFA, adding that in order to escape China’s influence “you have to produce your own goods or find an alternative source for imports, but this is impossible.”

“Another reason [we can’t escape] is because Chinese goods are cheap and Vietnamese consumers only see the immediate benefits—they don’t think about the issue of nationalism,” he said.

“They just let Chinese goods flood the market.”

But Thanh warned against boycotts of products from China, which were carried out to some degree during the height of tensions related to the oil rig deployment last year, and urged the government of Vietnam to look for a more reasonable solution that would not harm ties between the two nations.

“China is our neighbor, so we need to maintain a good relationship, but we also need strong ties with markets in other countries as well,” he said.

“We have to find a solution that benefits both sides—not simply a boycott of China.”

Report by Nam Nguyen for RFA’s Vietnamese Service. Translated by Viet Ha. Written in English by Joshua Lipes.

Comments (4)
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John Lone

from San Diego

Chinese diaspora undermind Vietnam economy and main contribution to this trade imbalance and illegal activities and trade across the border. Most of these diaspora will sell out their adopted countries any chance they get, few good examples are Greg Dongfan and Mak Chi!

Oct 30, 2015 01:03 PM

Giang

Cathy Sing: Yes, VN is gradually been changing for the better, not because of VN leadership skill, but by outside forces. VN is still not willing to change for the best. Because of China military aggressiveness, VN has to move close to US, Australia, Japan, India, etc. VN leads ASEAN in GDP because of cheap labor and export Chinese products as the article explained. Of the 20,000 Vietnamese attending US universities, how many returned to VN or in VN leadership positions? Is 100,000 Americans working in VN for Vietnamese companies or are working for foreign companies that investing in VN? So VN is just a source of cheap labor. Who are the 200,000 Vietnamese tourists visiting America? You know the strict criteria for Vietnamese to visit US? They are old (usually have family in the US) or have wealth so they would go back (you know who are the wealthy people in VN). The Vietnamese politicians are sending their family members to settling overseas. The daughter of the prime minister of VN just became a US citizen. If it is improving, why are they leaving? As for 1 million overseas Vietnamese returned home each year, they do it to visit and help their family not because of the any improvements.
The facts can be distorted if you don't know the truth behind them.

Oct 05, 2015 04:30 PM

Cathy Sing

from USA

. Yes, Vietnam must urgently but carefully, address the trade imbalance with China for national security, food safety and foreign reserve reasons. However, current lopsided deficit also is a double-sword situation and may hurt the slowing Chinese economy more while FTA's with EU, EEU, ASEAN and TPP neutralize negative impacts on Vietnam. The next move is on Vietnam's court.
. As for John from San Diego, it has been over 40 years since these Vietcong came out of the jungle and expel the "economic experts, human rights champion and corruption-free regime..." of South Vietnam. Things has gradually, been changing for the better as Vietnam now leads ASEAN in GDP growth with even more favorable headwind blowing in the right direction, including but not limited to US policies, regional geopolitics with Australia, Japan, India, the Philippines... Let's welcome improvements in forms of 20,000 Vietnamese attending US universities, 100,000 Americans working in Vietnam, 200,000 Vietnamese tourists visiting America and 1 million overseas Vietnamese returning home each year.... You're entitled to personal feeling of pain, but not distortion of facts!

Oct 03, 2015 10:59 AM

John

from San Diego

Vietcong came out from the jungle to rule over Vietnam, they do not know how to run the country effectively and everything they do are just copycats from China. Corruptions and human rights abused are their best known tactics!

Just common sense: Trading with enemy who try to robbed your territorial land and water? Le Hong Anh is one of their national traitor!

Oct 02, 2015 02:38 PM

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