Red flag rising over Vietnam-China illegal cross-border trade

Over the past few years, there has been an ever widening disparity between the import-export statistics released by Vietnamese and Chinese trade officials, specifically as it relates to cross border trade.

There is general agreement that the root cause of the variances are attributable to the difficult to measure informal cross border trade, which has sparked heated debate among National Assembly (NA) members at the current ongoing session in Hanoi.

In general, Vietnam’s estimates of exports to and imports from China have been consistently and significantly lower than those estimated by their counterparts on the Chinese side of the border.

As one specific example, for calendar year 2014, Vietnam trade officials estimated that imports from China were US$20 billion less than the figure Chinese officials recorded.

Specifically, for 2014 the General Statistics Office (GSO) estimated that Vietnam imported US$43.9 billion of products from China, while Chinese officials put the figure closer to US$63.8 billion.

“At this point it is important to point out that no one is exactly sure what the true figure is,” said Le Thi Minh Thuy, director of the GSO’s Trade and Service Statistics Department.

However, if for the purpose of argument one were to assume China’s figures were more accurate— that would mean Vietnam’s trade deficit with China could be as much as US$20 billion higher that Vietnam reported for just last year alone.

There is no dispute that the difference in the trade statistics across the borderlines fundamentally results from the informal trade across the border and the inherent difficulties in measuring the volume of it.

“It is also possible that Chinese officials simply have better controls in place to monitor the value of trade, but there is no basis at this point for assuming the Chinese figures are any more accurate than Vietnam’s” Thuy said.

Thuy added that it is also likely some Vietnamese businesses have been ‘cooking the books’ and reporting lower values on shipments coming into the country to avoid payment of import duties levied by the government.

It has generally been accepted that for years that there has been organized illegal trading and smuggling across the border at some level for which Vietnamese authorities cannot control, Thuy said.

Some NA members cited the case of Dong Dang in the Cao Loc district of Lang Son province as circumstantial evidence their suspicions that the so called ‘underground economy’ may be more severe than thought.

Dong Dang collected just VND1.1 billion in duties pertaining to cross border trade for the first nine months of 2014, which on its face is unreasonably low and doesn’t pass muster, they argue.

They suggest the actual taxes should have been substantially higher because most every truckload of product crossing the border carries a cargo with a value estimated in the billions of Vietnam dong.

Therefore they submit the actual tax collections are far too low and a further investigation is warranted to determine the exact cause of the problem, rectify it and if necessary prosecute those who have engaged in criminal conduct, if any.

“It’s very difficult for Vietnamese authorities to keep an exact tally on trade as everyday a lot of cigarettes and other products are smuggled across the border, said Vu Vinh Phu, a trade expert.

Additionally much of the trade across the border is done without properly completed bills of lading, Phu underscored, which makes it virtually impossible for border guards to get an accurate measure of the value of shipments.

Representatives from the GSO in turn proffered several reasons for the conflicting trade statistics and said they could have resulted from such things as mistake, simple math errors, misunderstandings, illegal trading, fraud and corruption.

Currently, Vietnam has 62 border gates, including 29 with China in seven northern provinces and more than 40 sub-border gates and over 160 paths, 30% of which are between Vietnam and China, they said.

Monitoring import-export activities through all main and sub border gates poses a daunting challenge for even the most diligent and dedicated of the nation’s management agencies.

It has been common knowledge for many years that informal cross border trading has been ongoing at some level but it has generally been perceived as always somewhat inconsequential.

However it is now becoming increasingly clear that the current level could be considered highly organized criminal conduct carrying with it a host of negative consequences for the national economy.

It is imperative that the government take remedial action to get the situation under control, said Economist Le Dang Doanh or exports stand a great chance of being blocked by China, which could have devastating consequences for the national economy.


Vietnam-China illegal cross-border trade