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VietNamNet Bridge – The appreciation of the Chinese yuan and the high inflation in China both have made Chinese goods more expensive. Therefore, Chinese goods are no longer competitive in Vietnam.
Chinese yuan appreciating more rapidly than forecast
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Commenting about the Chinese yuan appreciation, Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management (CIEM), said the Chinese yuan has been appreciating a little more rapidly than previously expected, but the value increase has still been going slowly.
According to Thanh, the latest yuan appreciation could be explained by the fact that the US dollar has been losing its value rapidly. Besides, China wants to take actions to cope with the high inflation and show the flexibility in the context of the international pressure.
According to CIECC, the Chinese yuan has increased by 1.8 percent in value against the US dollar since the beginning of the year, and has increased by 5 percent in value against the US dollar since June 19, 2010.
The Chinese yuan price increase and the high inflation rate (in March 2011, the consumer price index CPI in China increased by 5.4 percent, the highest increase in the last 32 months) both have pushed the prices of Chinese goods up in Vietnam.
Chinese goods no longer cheap
According to Truong Thi Thuy Lien, Director of Lien Phat Footwear Company in the southern province of Binh Duong; the prices of main materials for making shoes, including leather and fabric from China, increased by 40 percent in April in comparison with the same period of the last year.
“Chinese partners say the high inflation rate and the material price increases have forced them to raise the sale prices,” Lien said.
“The clients, who outsource the production to us, have had “strong reactions” to the price increases, even though they themselves define the material suppliers,” she continued, adding that the material imports from China account for 80-90 percent of the total materials needed to make a pair of shoes.
Southern provinces in China are the big material suppliers to Vietnamese garment and footwear producers. According to the General Department of Customs, in the first quarter of 2011, in order to export 4.19 billion dollars worth of garment and footwear products, Vietnamese enterprises had to spend 2.81 billion dollars to import materials, mainly from China. The import turnover increased by nearly 50 percent in comparison with the same period of the last year.
For a long time, Chinese goods have been selling very well in Vietnam thanks to the low sale prices. However, with the Chinese yuan price increase, the competitive edge is disappearing.
At the Thu Duc farm produce wholesale market, which is considered the biggest vegetable and fruit market in HCM City, the imports from China are not cheap and diversified any more. Previously, the supplies of Chinese goods were big enough to satisfy any orders. However, the situation is quite different now.
According to the Thu Duc Market’s management board, the domestically grown calabrese is now priced at 9000 dong per kilo, while the same kind of Chinese vegetable is selling at 20,000 dong. Vietnam’s Da Lat sourced cabbage is selling at 2300 dong per kilo, much lower than Chinese produce now selling at 7000 dong per kilo.
Especially, on May 2, only 100 tons of Chinese vegetables and fruits were traded at the market, a small volume if compared with the total volume of 1300 tons traded on the day.
Thanh from CIEM said that the Chinese yuan appreciation would encourage Vietnam’s export to China and restrict the imports from China, but the impacts would not be big. Thanh also said that he does not see this as a good thing, because this would encourage Vietnamese enterprises to export raw materials to China.
Source: TBKTSG
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