Vietnam-China bilateral trade: overcoming chronic weaknesses

15-Jan-2022 Intellasia | Vietnamnet | 5:02 AM Print This Post

According to data from the Vietnam general Department of Customs, Vietnam’s total import-export value by June 15, 2021 had reached $288.68 billion, up 33%, or $71.55 billion, year-on-year.

Vietnam’s exports hit $143.36 billion, up 29.7 percent or $32.79 billion, compared to the same period of 2020. Imports reached $145.32 billion, an increase of 36.4%, equivalent to $38.76 billion year-on-year.

China was still the main export market of Vietnam during this period, with $20.3 billion, up 27 percent year-on-year. Notably, exports to China accounted for 15.4 percent of Vietnam’s total export revenue of $131 billion.

In Asia, China was the largest export market for Vietnam, followed by the Association of Southeast Asian Nations (Asean), South Korea, and Japan. Of Vietnam’s total export revenue to Asian countries of $62.57 billion, China accounted for more than $20 billion.

Vietnam’s exports to China during this period were only behind a few major markets such as the US ($37.44 billion) and the European Union ($20.61 billion).

China is now an important market for Vietnam’s agricultural, forestry and fishery products. In the first 5 months of this year, China accounted for 22.6 percent market share in the total export turnover of agriculture, forestry and fishery products of Vietnam.

Vietnam’s export of many fruit and vegetable products to China increased impressively during this time. Specifically, dragon fruit exports reached nearly 1.2 million tonnes, up 138 percent over the same period of last year and 62.18 percent of the plan for entire 2021; mango over 468,000 tonnes, up 156.87 percent year-on-year, exceeding by 12.33 percent the 2021 plan; watermelon over 290,000 tonnes, up 131.80 percent year-on-year, 27 percent higher than the yearly plan.

Vietnamese vegetables and fruits were still mainly exported fresh, accounting for about 80%; while processed fruit and vegetable products accounted for only 20 percent of total export turnover.

Since 2016, exports to China have increased quite strongly, particularly in 2016-2018. In 2016, Vietnam’s export turnover to this market was estimated at $21.97 billion, and it increased to $35.46 billion in 2017, $41.27 billion in 2018, $41.41 billion in 2019, $48.87 billion in 2020 and $20.3 billion in January-May of 2021.

However, exports to China are still in the form of unofficial quotas (border trade), and trade exchanges between border residents, which causes risks for exported goods, especially agricultural products.

Therefore, the Ministry of Industry and Trade has repeatedly told Vietnamese exporters to export goods to the Chinese market soon via official channels (buying and selling under contracts, with clear conditions on delivery, delivery at international border gates, main border gates).

At the same time, they have been asked to strictly carry out regulations on traceability, area codes for growing, packaging facilities, and labeling, as well as other requirements to improve product quality, and to meet regulations and standards of foreign customers.

Imports from China rise sharply

Exports to China increased quite well, but in the opposite direction, imports of goods from China in the first five months of this year also rocketed, with $43.8 billion, up 54.2 percent over the same period in 2020. Thus, the trade deficit from China amounted to more than $20 billion, which has been a “chronic” problem in trade relations with China for decades.

Imports from China were still mainly raw materials, semi-finished products, components, and equipment for production and export activities, so this partly reflects the increasing production capacity of Vietnam. However, the risk is that the Vietnamese market is heavily dependent on China. The fluctuations of the Chinese market, including policy issues, can disrupt the supply of raw materials and machinery to Vietnamese enterprises.

The movement of imports from the Chinese market in the first months of this year was different compared to previous years.

For the first time, China surpassed South Korea to become the largest market supplier of computers, electronic products and components to Vietnam in the past 5 months, with approximately $8 billion, an increase of 54.6 percent compared to the same period of last year. Meanwhile, that of the Korean market reached $7.3 billion.

For machinery, equipment, tools and spare parts, in the first 5 months of 2021, Vietnam spent $9.73 billion to import these items from China, a sharp increase of 72.9 percent year-on-year, accounting for 51.4 percent of the total imports from China.

In the January-May period, China was the largest market supplying raw materials and accessories for the textile and garment industry of Vietnam, accounting for 51%, with $5.6 billion, up 42 percent over the same period of 2020. It was followed by Taiwan with $1.08 billion, up 25%; and South Korea with $1.06 billion, up 14%.

During this time, China and South Korea were still the two main markets supplying phones and components to Vietnam with a total value of $6.88 billion USD, accounting for 90.8 percent of Vietnam’s total import value of this group of items, including $3.67 billion from China, up 51.6%.

In particular, in the first 5 months of 2021, imports of CBU cars of all kinds from the Chinese market increased dramatically, reaching nearly 9,400 units, 6.5 times higher than over 1,400 units in the same period last year, including nearly 5,600 specialised cars and 2,840 trucks.

For many years, China has been Vietnam’s largest import market. In 2016, imports from China were nearly $49.93 billion and rose to more than $84 billion in 2020.

The trade deficit with China also increased sharply, from $27.96 billion in 2016 to $35.32 billion in 2020, and up to $23.52 billion in the first 5 months of 2021.

For many years, Vietnam has tried to reduce its trade deficit with China, but the results above show that to achieve this goal Vietnam still needs to make more efforts.

To reduce the trade deficit with China, boosting exports is not enough. Vietnamese enterprises mainly import machinery and materials for production from China.

In order to reduce the trade deficit from this market, Vietnam needs to have a strong processing and manufacturing industry and supporting industries, which are still weak at present. If this weakness is overcome, the competitiveness of Vietnam’s economy will improve, and the trade deficit from China will no longer be a constant concern.


Category: Economy, Vietnam

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