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Despite a decline in the trade deficit, Vietnam's import bill for production materials from China sharply increased. 

In 2017, Vietnam imported US$57 billion of Chinese goods, equivalent to some 30% of the total import turnover, leaving a trade deficit of a staggering US$26.3 billion, or some 10% of gross domestic product.

The Ministry of Industry and Trade said in a recent report on Vietnam’s 2018 imports and exports that Vietnam’s imports amounted to US$65.4 billion, but the proportion of Chinese imports accounted for 27% of the total imports. As a result, the trade deficit with China fell to US$24.2 billion.

The decline was ascribed to the fact that the value of Vietnamese exports to China rose by 16.6% from a year earlier to US$41.3 billion. As such, the reduced dependence on the Chinese market delivered an improvement but a slow one.

Among Vietnam’s top trading partners making up more than 72% of the imports and exports last year, China was still the largest partner with value amounting to US$106.7 billion, or 22.7% of the total.

Other partners, such as South Korea and the United States, were far behind China, representing 13.7% and 12.6%, respectively.

The reliance of Vietnam’s exporters on China has been easily exposed in certain produce, seafood, fruit and raw materials. These exports are still dependent on China since they have yet to penetrate markets with stringent quality and food safety standards.

For example, Vietnam shipped its produce and seafood to six major markets, including China and the European Union, whose revenue for 2018 totaled U$20.31 billion, and China bought up to US$7.26 billion worth of these products, accounting for one-third of the total sales to these markets.

Vietnam also exported its natural rubber products, worth US$1.37 billion, to China, representing a whopping 65.5% of the country’s total exports.

Even though Vietnam has restructured its exports by limiting sales of crude oil, the export revenue of computers and largely their parts generated some US$8.3 billion, making up 28.5% of outbound sales among industrial products.

This could be attributable to the likelihood that foreign-invested enterprises set up parts plants in Vietnam and exported their products to China for assembly. Afterward, the finished products are shipped to third countries.

According to experts, Vietnam needs to make full use of the free trade agreements with South Korea and Japan or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership to restructure its export portfolio and expand its markets, and hence reduce its reliance on a single market like China. SGT