Trade Ties with China: Efforts to Boost Exports, Narrow Trade Deficit

According to data from the Ministry of Industry and Trade, Vietnam mainly exports raw materials, fuels and minerals. These three groups of commodities account for 55-60 percent of Vietnam’s export value. Agricultural and aquatic products like fruits, rubber and coffee make up 15-20 percent. The industrial group contributes the smallest proportion, with just over 10 percent.

 

Mr Tran Dinh Thien, Director of Vietnam Economic Research Institute, said that Asian countries, especially China, will become emerging consumer economies in the coming time. This means that importing demands from such nations will increase. Thus, in addition to traditional customers like the US, the EU and Japan, Vietnam will take advantage of geographic distance and cultural similarities when it accelerates exports to China.

 

He pointed out that Vietnam mainly exports to 12 southern and south-western provinces of China like Guangxi, Guangdong, Yunnan, Guizhou, Sichuan and Chongqing and have lately started setting foot on some north-eastern provinces. Therefore, if Vietnam continues to strengthen trade promotion and expand the geographic scope of export to other landlocked provinces in China, this will be an extremely large market.

 

Taking advantage of the shared borderline stretching thousands of kilometres and interlinked railways, roads and waterways, transport costs will be low and cross-border trade will further balloon, Mr Thien said.

 

Demand variation from region to region in China is diverse. Northwest and central provinces have regular demand for tropical fruits and juices. Landlocked southwest provinces have a permanent demand for aquatic products. Eastern provinces and special economic zones need a variety of high-quality products from neighbouring countries such as wooden furniture, fresh seafood and tropical fruits.

 

ACFTA offers better conditions for Vietnamese goods to enter the Chinese market. According to this agreement, China lowered tariffs on Vietnamese goods sooner than Vietnam did to Chinese goods. However, Vietnam did not cash in on this good opportunity through the "Early Harvest" programme, while Chinese enterprises did better when exporting a large volume of fruits to Vietnam, added Mr Thien.

 

Speaking of Vietnam’s exporting advantages, Mr Dao Tran Nhan, Director of Asia Pacific Department (under the Ministry of Industry and Trade), noted that Chinese companies tend to relocate factories to Vietnam in recent years. This is a favourable opportunity for Vietnamese enterprises to enter into joint ventures with foreign partners to export to this huge market.

 

While Vietnam’s exports to China account for about 8.59 percent of its total, they equal just 0.48 percent of China’s imports. Vietnam’s trade deficit with China accounts for 60 percent of its import - export revenue.

 

Vietnam’s major exports to China are mainly raw materials like coal, rubber, crude oil, and other industrial goods. Thus, the added value is relatively low. Tran Dinh Thien warned: "The trade deficit with China last year surpassed the country’s aggregate deficit. This is a very serious problem."

 

Mr Dao Tran Nhan added that Vietnam’s tariffs in the framework of ACFTA decline more than its WTO commitments. So, Chinese goods have better opportunities to penetrate the Vietnamese market, thus intensifying pressures on Vietnamese products on the home market and increasing the trade deficit.

 

Regarding solutions to narrow the trade gap with China, Mr Nhan said the Ministry of Industry and Trade has requested China to adopt policies to increase the importation of 16 Vietnamese key commodities like agricultural, forest and aquatic products and fruits. In addition, the Asia - Pacific Market Department has built up a scheme to fill the trade gap with this market.