China’s slowdown may widen Vietnam trade gap, official says

China’s economic slowdown may widen Vietnam’s trade deficit as the Southeast Asian nation counts on its largest trading partner to buy commodities, according to a government official.

“It would hurt our exports to China, especially with agricultural products,” Nguyen Duc Kien, deputy head of the National Assembly Economic Committee, said in a telephone interview on July 10. “Meanwhile, our imports from China may surge as Chinese producers may lower prices to dump their products abroad.”

China has been Vietnam’s biggest trade partner since at least 2007. The recent stock plunge and the slowdown in China’s growth has triggered concerns in regional governments including Indonesia and Philippines.

“A surge in sales of Chinese products at low prices in Vietnam would hurt domestic manufacturing with producers of goods similar to those imported from China likely suffering the most,” said Kien. “Yet, the Chinese stock rout may prompt investors to switch to other regional markets, including Vietnam.”

Some benefits

Vietnam posted a trade deficit of US$700 million in June, data from the Hanoi-based General Statistics Office showed. Imports from China reached US$24.4 billion in the first six months, up 24% from a year ago while exports to China climbed 3.6% to US$7.7 billion in the same period.

The benchmark VN Index climbed 0.4%t as of 10:40 a.m. in Ho Chi Minh City. The measure has advanced 15% this year.

Certain Vietnamese industries may benefit from cheaper Chinese raw materials, said To Hoai Nam, vice-chairman of Vietnam Association for Small and Medium-sized Enterprises.

“Producers of garment, apparel and footwear will have a chance to expand production as the slowdown will force Chinese suppliers to lower prices,” Nam said in a phone interview.