There are suspicions about the import of Chinese goods to label Vietnam origin for export. However, statistics do not support this argument.

The Sai Gon Hi-tech Park

The General Department of Vietnam Customs has just published figures about commodity imports and exports in September and the first nine months of 2020. Consequently, the trade balance continued to gain a surplus of nearly US$3 billion in September, the second month with a very high trade surplus after August with nearly US$5 billion.

Overall, the trade surplus in the first nine months reached US$16.5 billion, the highest ever to date. This is not only the figure which Vietnam has never achieved before but also the level which no one can visualize when Covid-19 has been playing havoc and developing complicatedly worldwide.

This achievement is even more special when major export markets of Vietnam such as the United States and the European Union are hit the hardest by the pandemic. Therefore, there may be many concerns as well as questions about what has caused such a spectacular transformation in Vietnam’s import and export activities. Is it the goods origin factor, as Chinese exports to the United States are slapped with a 25% tax? Will this trend continue over the remaining months of the year, and what will be like in 2021?
Reasons

Vietnam’s trade surplus in recent years owes largely to Samsung’s activities when global economic growth has pushed up consumption of smartphones. However, the latest statistics show that Samsung’s exports of smartphones and components in the first nine months reached US$10.6 billion, up only 0.1% from the year-earlier period.

The statistics also show that Vietnam’s exports to the United States in the nine-month period were US$54.7 billion, rising as high as 22.7% year-on-year. This development has intensified the suspicion for the origin fraud. However, this is not true in reality, as Chinese imports into Vietnam in the first nine months increased only 4.1% year-on-year. The figures for export growth to the United States and import growth from China are not equivalent.

So, what is the satisfactory answer? There are two main reasons deemed as more convincing. First, it is the drastic decline in imports. Figures show that Vietnam’s imports in the first nine months reached US$186 billion, down 0.7% from the year-earlier period, while exports achieved US$202.5 billion, up 4.1%.

Rising exports versus falling imports has increased trade surplus. The reasons for the import decline are enterprises have actively reduced material inventories due to a fall in orders and there are not many big foreign direct investment (FDI) projects developed in the year to date. Therefore, the demand for importing machinery and equipment for factory construction and production has also gone down. Figures show that machinery and equipment imports in the nine-month period were US$26.4 billion, down 1.3% year-on-year; while imports in the same period last year recorded a year-on-year increase of 12%.

The second reason is rising exports of computers and electronics in the first nine months, reaching over US$32 billion, up 25.8% year-on-year. The pandemic has pushed up the demand for working online, sending consumption of related products like computers, monitors, chips and AirPods soaring. These are products which Samsung, LG, Apple and Intel plants in Vietnam enjoy great advantages.

Prospect for 2021

Imports of goods to serve shopping in Christmas and the New Year generally surge in the late months of the year. However, Covid-19 has taken a heavy toll on the purchasing power of consumers worldwide. Therefore, exports of products like cellphones, clothing and footwear will hardly achieve positive growth in 2020. Exports of clothing and footwear in the first nine months fell 9.9% and 8.4% year-on-year, respectively. Therefore, the trade balance in the remaining months of the year will hardly achieve a high surplus as those in August and September.

Nevertheless, the question of more interest to many people may be the development in 2021. Most forecasts by international financial institutions show that the global economy will recover in the V-shape in 2021. High economic growth will push up investment demands. Vietnam is seen as the most favorable destination for businesses from the United States, Japan and South Korea post-Covid-19.

In addition, there may be a shift of manufacturing out of China. Rising FDI also means a strong demand for imports. Low prices of materials at present may prompt enterprises to increase imports for storage. This development indicates the demand for imports will increase, while exports will hardly pick up in a short time as consumer demand has yet to return to the pre-Covid-19 level. Therefore, it may be hard for the trade surplus to continue at a high level in 2021 like the development in 2020.

SGT

Trade surplus reaches $7.2 billion

Vietnam’s total import-export turnover for agricultural, forestry and fishery products in January-September was estimated at nearly US$52.8 billion, making for a trade surplus of $7.2 billion,