VietNamNet Bridge - The heavy reliance on China as an input material and finished product supplier is seen as a big problem for Vietnam. 

 

Nguyen Dinh Cung and Tran Toan Thang, the two senior researchers from CIEM, said that Vietnam relies on Chinese imports in South East Asia more than most other countries.

In a report sent to a workshop on socio-economic forecasts held on December 2, the two economists pointed out that in 2004, the reliance index of ASEAN countries was higher than Vietnam’s by 16 percent. But Vietnam’s index was 21.7 percent higher than ASEAN’s in 2014.

Vietnam relies on Chinese imports in South East Asia more than most other countries.

CIEM’s researchers warned that the reliance is increasing each year with a rapid increase in imports from China, especially input materials for textiles and garments, electronics and engineering equipment.

They warned that the reliance on Chinese imports would make it difficult for Vietnam to take advantage of the global integration process.

Most of the free trade agreements (FTAs) Vietnam has signed stipulate that Vietnam can only enjoy preferential tariffs if at least 30 percent of the content of Vietnamese export products are made in Vietnam or inner-bloc countries. 

This means that if Vietnam continues relying on Chinese input materials, it won’t be able to enjoy the preferential tariffs offered by FTA-member countries.

As for exports, CIEM’s calculations show that Vietnam’s reliance on the Chinese market is lower than that of ASEAN countries. However, the reliance has been on the rise since 2008. 

Vietnam cannot adjust its export reliance index amid regional political problems. This is different from the Philippines, which is also in a territorial dispute with China.

“The Philippines has adjusted its trade structure with China more quickly than Vietnam in order to ease the reliance,” the report said. Forty-six of 93 business fields in the Philippines have reduced their reliance on China, while the figure is 40/94 for Vietnam. The number of Vietnam’s business fields with a reliance level of ‘medium’ to ‘very high’ is twice that of the Philippines.

The deputy director of the Industry and Trade Information Center, Le Quoc Phuong, agrees that Vietnam’s economy heavily depends on China which can be seen in the year-on-year trade deficit, from $200 million in 2001 to $28.9 billion in 2014, a 114-fold increase over the last 15 years.

Noting that imports from China are mostly input materials for domestic production and only 20 percent of Chinese imports are consumer goods, Phuong warned that this will affect Vietnamese businesses’ capability of upgrading technologies, and that Vietnam may see ‘de-industrialization’ as it can only export to China raw materials and natural resources.


VNE