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To reduce trade deficit, Vietnam should start from “China hazard”   2011-06-17 - Viet Nam Net

Experts believe that Vietnam just needs to reduce the trade deficit with China, and its general trade imbalance will be settled.
Chinese yuan appreciates, raising worries about the reliance

“Vietnam exports fruits to China. It exports coal and then imports power. It exports rubber and then imports car tires. As for the garment industry, if China stops supplying materials, the industry would face big difficulties,” said Le Dang Doanh, a well known economist in Vietnam, at the workshop discussing the sustainable trade development in 2011-2020 held in Hanoi on June 14.
He has expressed worry that the continued trade deficit would lead to the heavier reliance on China. “In the context of high trade deficit, if involved parties have to make payment in Chinese yuan, Vietnam would become financially reliant on China as well,” Doanh said.
Former Deputy Prime Minister Vu Khoan, emphasized that there have been the big changes in the scale of the economies in the world and the changes in the competitiveness of the nations, which need thorough research.
Recently, Vietnamese experts have mentioned the impacts of the Chinese yuan appreciation, but the research works remain cursory. Meanwhile, Vietnam should make thorough analyses about the movements in the world and the possible impacts on Vietnam.
According to former Minister of Trade, Truong Dinh Tuyen, in order to obtain as sustainable development, Vietnam needs to strive to stabilize the macro economy, especially, it needs to narrow the gap between imports and exports and expand export markets.
However, Tuyen said the story about Chinese market remains a tough problem.
In the story about the trade deficit with China, it is necessary to differentiate two matters – the trade deficit caused purely by trade relations, and the trade deficit caused by investments, with 90 percent of energy and electricity projects undertaken by Chinese contractors. Tuyen stressed that Vietnam will find the solutions when it splits the two matters.
Tuyen believes that there are still big opportunities for Vietnam. There is a growing tendency of increasing exports to China, because the country is restructuring the economic structure, shifting from competing with low prices to competing with high quality. In the economic restructuring, China will stop making many products, and it will have to import instead. This should be seen as both the opportunity and the challenge for Vietnam.
Positioning Vietnam’s export
Discussing the sustainable trade development, participants at the workshop all agreed that this relates to many problems of the national economy, including the investments, decentralization and restructuring.
Khoan has pointed out the paradoxes which have existed for many years and remain unsettled. He said that in terms of export, the world now favors the products which are friendly to environment and energy saving, while Vietnam does not have such products to export.
Meanwhile, in terms of import, Vietnam has been importing the things which are energy consuming and not environmentally friendly.
Mentioning the nuclear power development, Khoan said while many countries are reconsidering nuke power plants, foreign companies have been trying to export nuke power plants to Vietnam, which is worth thinking.
Foreign investors have been coming to Vietnam in masses to build up steel mills, saying that they want to take full advantage of the cheap labor force in Vietnam. However, in fact, they have been trying to transfer the industry which causes environment pollution and consumes much energy into Vietnam, the place, where the electricity price remains low and the environmental costs are not high.
Experts have also pointed out that Vietnam should think about while other regional countries have trade surplus with China, Vietnam has trade deficit with China. Thailand, for example, has the trade surplus with China at 11.5 billion dollars, while Malaysia’s excess of exports over imports to China is 12.5 billion dollars, and the figure of the Philippines is 3.3 billion dollars.
The trade deficit with China has been increasing rapidly over the last 10 years. In 2001, the figure was still low at 787 million dollars, while the figure jumped to 12.7 billion dollars in 2010.

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