The health and the "wobble" of the Chinese economy have caused considerable impacts on the international community. Domestic and international specialists expressed their concerns about China’s impacts on the Vietnamese economy. The information was heard at the conference on China economy in the first six months and prospects in 2015 held in Hanoi by the Central Institute for Economic Management (CIEM) in cooperation with the Vietnam Centre for Economic and Policy Research (VEPR).
Scenario of the world’s No. 2 economy
Dr Nguyen Tu Anh, Head of Macroeconomic Policy Department (CIEM), said that the “Report on China's six-month economy and prospects in 2015" is part of China Macroeconomic Report organised every six months. With the support and consensus of scientists and economists, a forum for domestic and international researchers to present their research results to shape a network for researchers to exchange issues related to China’s macro economy, an influential economic institution whose impacts are considered to be the biggest in the world now.
Scientists from China Research Programme presented detailed Chinese economic data updated in the first six months of 2015. Remarkable highlights of China's economy are 1.3 percent inflation growth, a sharp industrial production slump, a 6.9 percent decline in export - import values, 0.9 percent slump in export growth and a 15.5 percent drop in import. Besides, according to Chinese study specialists, this report delved into China’s yuan devaluation to thwart deflation and explanations to growth and export stimulation. The People's Bank of China (PBOC) did this to take another step in internationalising its yuan. Yuan devaluation was aimed to test market reactions if the yuan is left to float. Then, researchers pointed out major risks to Chinese economy in 2015 and beyond such as deflation, bad debt and sluggish reform.
Impacts on Vietnam
Another issue of attention is whether changes in the above economic strategies affect neighbouring economies like Vietnam, said Anh. The yuan devaluation cannot hinder the slowing growth of China. Indeed, the exchange rate fixing of China is technical. China is unlikely to devalue its currency because its companies’ debts approximated US$1,600 billion, he added.
In response to concerns that China’s exchange rate fixing will cause detrimental impacts to Vietnam's economy, Anh said China’s move will have positive effects on the Vietnamese economy. Cheaper inputs will bring down production costs and enhance competitiveness for Vietnamese exports using imported inputs from China. Besides, falling inflation will provide a chance for slashing lending rates. More importantly, with its look and insight, the State Bank of Vietnam (SBV) took action to cope with exchange rate by devaluing dong and widening FX trading band. This is one of wise and careful steps of Vietnamese financial and banking leaders.
Besides, Anh pointed out that the slowing growth of the world’s second largest economy will benefit Vietnamese economy. It is clear that anticipated falling prices of basic commodities on the world market will facilitate production in Vietnam; capital surplus in China is likely to seek external opportunities and Vietnam should utilise this source of capital; and China’s products may flood Vietnam and cause the opposite effects. Vietnam’s companies will face hardships in competing with domestic producers. FDI companies may have to lower prices, expand scales and output to compete with competitive pressures from China. FDI flows may be reduced and shifted away from China and Vietnam is as a potential destination. Besides, the report points out negative impacts of China’s slowing growth on Vietnam.
Mr Tran Thanh Hai, Deputy Director of the Export Import Department under the Ministry of Industry and Trade, said the yuan devaluation by the world’s second largest company does not affect much Vietnam’s exports and imports.
He analysed that garment - textile and leather - footwear sectors have huge advantages in joining global value chains when Vietnam enters multilateral and bilateral free trade agreements. And, Vietnam is currently using raw materials from China to feed these two industries. However, when the yuan is low, firms have more opportunities to access cheaper and more competitive raw materials. This will boost garment - textile and leather - footwear exports, Mr Hai noted.
Regarding agricultural products, he added that Vietnam does not export a lot to China and the yuan devaluation is therefore not affecting Vietnam’s agricultural exports. We will be affected a little bit when we ship a large volume of agricultural commodities to China like cassava and rubber now, Mr Hai said.
Anh Phuong
Vietnamese
