Vietnam says dependence on Chinese imports shrinks

The chronic trade deficit with China has long troubled Vietnam’s economy, though the dependence on Chinese imports is hard to avoid for a rising economy like Vietnam’s. According to the General Department of Customs, China is still the largest exporter to Vietnam, accounting for US$40.24 billion in the last 10 months, though the total has decreased by 1.4% compared to the same period last year.

Vietnamese exports to China have been facing many challenges as China is in an economic downturn. But despite China’s many trade barriers against Vietnamese products, in the past 10 months of 2016, Vietnam’s exports to China accounted for 12% of the country’s total.

Efforts to decrease the trade deficit with China is an important policy and one of the Ministry of Industry and Trade (MoIT)’s chief concerns. — Photo dantri.com.vn

Vietnam’s main imports from China focus on manufacturing products, with machinery, equipment, accessories, steel, phones and phone accessories, textile materials, leather, chemicals and vehicles, each worth around US$1 billion.

Nonetheless, under pressure of the rule of the origins of goods, Vietnamese supporting industries are expected to increase production, enabling the country’s export potential to grow and imports to decline. This would reduce the trade deficit towards a better trade balance between the two countries. Furthermore, Vietnamese authorities are urged to impose stricter quality control on imported Chinese materials.

Experts noted that if more free trade agreements (FTA) go into effect, Vietnamese exporters will have to pay more attention to the origins of goods to avoid importing materials from China if they wish to take advantage of said FTAs in preferential tax treatment and to avoid technical barrier and dumping cases.

Businesses are moving away from Chinese imports by diversifying imports from other markets, especially from South Korea since implementation of the Vietnam-the Republic of Korea (RoK) FTA on December 12, 2015. Imports from South Korea constitute 18% of total imports as of October 2016, having increased 10.8% since last year.

RoK is now the second largest exporter to Vietnam, with a total export turnover of US$26 billion, an increase of US$2.7 billion, or 11.8%, compared to the same period in 2015. Due to a 10% tax on Vietnamese petrol, the amount of imported petrol from RoK to Vietnam has increased to 1.34 million litres, equal to US$633 million.

Japan and Thailand’s exports to Vietnam are also on the rise, at US$12.2 billion and US$6.9 billion, respectively, in the first 10 months of 2016. Imports from the US accounted for US$6.86 billion.

The MOIT asserted based on these figures that Vietnam would slowly utilise the signed commitments and FTAs with these countries, to gain freer markets and reduced import tax levels and shrink its dependence on Chinese imports.