VietNamNet Bridge - While China, Laos and Thailand are believed to benefit from the Chinese ‘infrastructure leverage’ program, Vietnam will sustain negative impact from it.

The Chinese Studies Research Program belonging to Hanoi National University has warned that Vietnam will suffer from the program initiated by China.

The concept “infrastructure leverage’ was first mentioned by Pham Sy Thanh, the program’s director, and Truong Minh Huy Vu, director of the international studies center SCIS, an arm of the HCM City National University, in an article published on Thoi Bao Kinh Te Sai Gon in May 2015.

China, for the first time, raised an initiative on inter-continental economic cooperation with the ‘one belt, one road’ plan aiming to fund the projects on infrastructure connections to facilitate trade and investment.

Double recession predicted for Vietnamese businesses

It is not GDP or inflation, but debt and deflation, which is the threat to the Chinese economy in the next years.

The biggest problem of the Chinese real estate market is the inventory volume of 2.5 billion square meters of houses. If China cannot solve the deflation and debt problems, it would see the asset market, especially the real estate one, collapse like the US and Greece once saw. 

The deflation in China has led to a demand decrease, including a decrease in imports from Vietnam. This means that Vietnam would find it more difficult to export goods to China, while the exports would see the prices decrease. The double decrease (in quantity and price) could bring double recession to Vietnamese businesses.

What are Vietnamese businessmen doing?

According to Thanh, with the ‘One belt, one road’ policy, China has built roads which go down south (through Laos, Cambodia and Thailand) and angle down the west (via Thailand and Myanmar), connecting with the sea.

Meanwhile, Thanh noted that Vietnam pays no attention to the issue. ‘We, on the east side of the Truong Son Mountain, take our vacation on beautiful long beaches,” he commented.

Meanwhile, as Thanh commented, Vietnam’s inland transport system comprises the roads from the north to the south, while they do not expand to the east and west, and therefore, cannot connect regional countries.

Of the 20 operational seaports, only Sai Gon Port is situated on the international maritime route. 

Therefore, there are many reasons to fear that Vietnam would become just a subordinate route in the regional trade activities.

Leverage may bring misfortune

Under the strategy on developing a new route, Yun Nan (China), Vientiane (Laos) and Bangkok (Thailand) will become three major intersection points to attract trade and investments from other countries. In such context, Vietnam may bear negative impact from the ‘infrastructure leverage’. 

PL TPHCM