- Vietnam still imports products from China that are plentiful at home
- PM Nguyen Xuan Phuc finishes tour of China
Balancing trade
Since 1991, when Hanoi and Beijing re-established their diplomatic ties, the total commercial trade of Vietnam with its northern neighbor has risen from just US$30 million to US$66.3 billion in 2015.
In 2001 Vietnam incurred its first negative balance of trade with China and the unhealthy trade imbalance has continued to fester ever since.
Figures from the General Statistics Office (GSO) show the trade deficit for 2015 was US32.3 billion (US$49.3 billion of imports from China less US$17.0 billion of exports to China).
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The huge size of the trade deficit highlights the importance of the nation’s trade surplus with the US (US$22.5 billion in 2015), its largest trade partner, and the EU (US$20.6 billion in 2015).
Because without the trade surpluses with the US and EU, Vietnam could not offset the trade deficit with China and balance its trade books, a situation that could have serious negative currency ramifications.
On a positive note, trade statistics from the GSO for the first quarter of 2016 reflect the trade deficit fell by 15.6% on-year to US$6.5 billion, a rate that if it were to continue would mean the deficit is in a downhill trajectory from 2015 and would hit US$28 for 2016.
While this is may be a good sign for the nation’s economy, a US$28-billion trade deficit still represents an enormous deficit.
Of course there is always the nagging problem of what many refer to as the ‘informal economy’ which concerns itself with the huge amounts of commercial goods (including counterfeit items) that are smuggled into Vietnam on a regular and ongoing basis from China.
These illegitimate, cheap and low-quality products have a pervasive negative effect on the national economy.
This is why the visit by Prime Minister Nguyen Xuan Phuc has raised hope among so many that it would help to create a healthier and more sustainable economic relationship with China.
According to state media, in his meetings with Chinese officials and leaders in Nanning and Beijing, Prime Minister Phuc talked about improving collaboration between the two countries on economic issues and asked for China’s cooperation in giving effect to measures to bring trade into balance.
The Vietnam News Agency quoted the Prime Minister as saying that China would continue importing goods for which Vietnam has a comparative advantage and in the near future authorize the nation to export increased levels of meat, dairy and processed juices within its borders.
According to Chinese estimates, the total commercial trade between China and Vietnam will surpass US$100 billion this year, and it will overtake Malaysia to become the biggest trading partner of China in Southeast Asia.
