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Will Vietnam businesses become export agents for China?

VietNamNet Bridge - Economists have warned that the Vietnam economy will “bear a lot of damage from the US-China trade war”.
VietNamNet Bridge - Economists have warned that the Vietnam economy will “bear a lot of damage from the US-China trade war”.


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Pham Chi Lan, an economist, at the Q3 macroeconomic report launching ceremony held by VEPR (Viet Nam Institute for Economic and Policy Research) on October 10, warned about the ‘sword hanging over the head of Vietnamese enterprises’.

When the trade war escalates, China, which has great advantages, will have higher demand to export products to neighboring countries, including Vietnam. China will try to export to the US through third countries.

According to Lan, when cheap products from China flood the Vietnamese market, they will block Vietnam-made products of the same kind.

Vietnam may become the target of the US in its activities to fight against anti-dumping duty avoidance.

“Most Vietnam exports are made of input materials from China. If Vietnamese enterprises continue outsourcing and don’t create higher added value in Vietnam, their products may be judged as not meeting standards to be exported to the US market,” she warned.

Vietnam ranks fifth among the countries which have a surplus in trade with the US. And now the situation may become even worse when China increases its investment and boosts exports to Vietnam, which may prompt the US to add Vietnam to the list of countries it wants to apply trade sanctions.

Vietnam ranks fifth among the countries which have a surplus in trade with the US. And now the situation may become even worse when China increases its investment and boosts exports to Vietnam, which may prompt the US to add Vietnam to the list of countries it wants to apply trade sanctions.

Le Dang Doanh, former head of CIEM (Central Institute of Economic Management), also thinks that Vietnam will bear damage from the trade war.

“China exports $503 billion worth of products to the US. Now, as exports are meeting barriers, it will try to find other markets, and Vietnam is a market nearby,” Doanh said.

He said that Chinese enterprises would try every possible way, including the ‘back door’, and bring goods across the border gates to Vietnam. If a Vietnamese company labels Chinese products with Vietnamese origin, this will be a danger.

“One rotten apple will spoil the barrel,” Doanh said, adding that the mistakes made by several companies would affect whole industries.

VEPR’s Q3 macroeconomic report says the targeted GDP growth rate of 6.5-6.7 percent in 2018 is within reach. However, VEPR’s economists are concerned about high inflation.

Nguyen Duc Thanh, head of VEPR, commented that in the context of the trade war and rising protectionism, Vietnam’s economic future remains uncertain amid shocks in the world market.

About inflation in 2019, Thanh said the imposition of high environment taxes on petrol alone would increase inflation in the next year by 1.6 percentage point, if the fuel price stays at a high level.


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