Last update 12/29/2010 1:00:00 PM (GMT+7)

Vietnam dizzy with trade gap with China

VietNamNet Bridge – In the two way trade with China, Vietnam has been importing more than exporting to the country. The trade gap has made a new record when it climbed to $12.6 billion, or 105 percent of Vietnam’s trade gap in 2010. Experts have warned that Vietnam’s economy has been too reliant on the neighbouring economy.

Trade gap keeps increasing

Deputy Minister of Industry and Trade Nguyen Thanh Bien admitted that the trade imbalance remains the biggest problem in the trade relation with the neighbouring China

In fact, Vietnam’s exports to China have been increasing steadily in the lat three years by $500 million-1.2 billion a year. However, the export growth is not high enough to the imports increases of $3-3.5 billion a year.

In 2007, the trade gap with China was $9.145 billion, or 64 percent of the whole year’s total trade gap. The figures rose to $11.6 billion and 61 percent in 2008, and then to $11.532 billion and 90 percent in 2009.

In 2010, the trade deficit with China further increases to the alarming level of $12.6 billion, or 105 percent of the whole year’s total trade gap ($12 billion)

It is clear that according to the plan for developing import-export with China for 2007-2015 that the Ministry of Industry and Trade drew up in 2007, Vietnam has failed to ease the trade imbalance with the neighbouring giant.

Dr Nguyen Minh Phong from the Hanoi Socio-Economic Development Institute said that Vietnam is now entering the third alarming level, which is very dangerous. The overly high trade gap with China will make the payment imbalance more serious.

Since 2004, the bilateral trade between Vietnam and China has been prosperous, but China enjoyed the biggest benefits. China made products have been dominating Vietnam’s market and dislodging the products from other countries from the market. China made goods have been accounting for a surprisingly high proportion of the total import turnover, and have been increasing steadily from 19.8 percent in 2008 to 25 percent in 2009.
It is estimated that in 2010, Vietnam had to spend 19 billion dollar to purchase goods from China, or 23 percent of the total import turnover. Meanwhile, Vietnam earns only $6.4 billion from the exports to the country.

The noteworthy thing is that Vietnam has trade relations with nearly 200 countries and territories, but China alone provides ¼ of the input materials needed by Vietnam’s economy.

The figure shows that China’s influences on Vietnam’s economy have become stronger than ASEAN which only accounts for 18.9 percent of Vietnam’s total import revenue, and the EU with 7.2 percent.

Experts said that it is understandable why there continues to be a big trade gap with China. Five years ago, no one could imagine that China would surpass China to become the second biggest economy in the world.

Reducing the trade gap with China, when?

Experts have expressed their worry that the target of reducing the trade gap with China has become more difficult to attain.

The report released by the Ministry of Industry and Trade shows that in 2009, Vietnam’s mineral exports to China accounted for 55 percent of the total export turnover (coal, rubber and crude oil). Meanwhile, in 2011-2012, Vietnam expects to export to China alumina from the Central Highlands’ bauxite project as well.

However, Vietnam now has to gradually reduce the exports of natural resources in order to ensure energy security. In 2009, the crude oil exports was reduced by 24 percent, while in 2010, the coal exports was reduced by 50 percent.

While Vietnam has to reduce the exports of minerals to China, it cannot increase the exports of other products to the country. The exports of farm produce and seafood, the key products of Vietnam, account for only 15 percent of the export turnover to China.

There are five groups of goods that Vietnam has been imported in biggest volumes, including machines and machine parts; petroleum products; steel; fertilizer and materials for garment industry. Meanwhile, China is the big supplier of all the five groups of products.

In 2010, up to 56 percent of imported steel came from China, while 40 percent of fertilizer imports, 70 percent of materials for garment industry, 37 percent of fabric and 17.7 percent of petroleum products also came from the country

Moreover, Vietnam is planning to increase the volume of electricity it will purchase from China to four percent of the total demand. 90 percent of technologies for thermopower plants are sourced from China.

When will Vietnam be able to reduce the trade gap with China?

Pham Huyen