Vietnam, China Boosting Border Trade

 

After the signature of the ASEAN-China Free Trade Area, the Vietnam-China two-way trade turnover increases rapidly and is expected at US$10 billion in 2006, Dr. Dinh Trong Thinh of the National Academy of Public Administration (NAPA) forecasted. In 2005, China was the third largest export market of Vietnam.

 

Before 1996, the import-export payment for goods across the Vietnam-China borderline was mainly in the forms of goods for goods, foreign currency payment with banks’ permits, free foreign currency payment or payment through private units. The payment by official currencies of the two countries (in Vietnamese dong and Chinese yuan) was not applied and business contracts were fulfilled without banks’ intervention. The foreign exchange at borderline areas was issued by private vendors; hence, tricks, smuggling, illegal currency trading and counterfeit money were rampant.

 

By 2000, the State Bank permitted commercial banks to make payment for import and export activities across the Vietnam-China borderline by domestic currencies to facilitate the payment for the two sides. After that, Vietnamese commercial banks quickly develop border payment services. Typically, the Vietnam Bank for Agriculture and Rural Development (Agribank) has business contacts with 45 banks in China, including 17 Chinese banks. Agribank was a pioneer in opening agents and signing border payment agreements with China’s four largest commercial banks. At present, Agribank has opened more than 100 points of foreign exchange to meet the demand of clients. According to statistics, the border payment turnover via Agribank increased sharply from VND700 million (US$43,750) in 1996 to VND10.16 billion (US$635,000) in 2005. The foreign exchange revenues also rose from CNY2.4 million in 1996 to CNY2.5 billion in 2005.

 

Other commercial banks also followed steps to sign border payment agreements with Chinese banks to serve the demand of the two countries’ clients. According to Mr. Dinh Xuan Hang of the National Academy of Public Administration (NAPA), the Mong Cai Branch of the Industrial and Commercial Bank of Vietnam (Incombank) reported that its Vietnam-China border payment turnover jumped from VND1.4 billion (US$87,500) in 1997 and VND17,000 billion (US$1.06 billion)in 2005. This activity contributes more than 20 per cent of profits for the branch.

 

Many modern payment services have been applied in Vietnam: International payment network (SWIFT) substituting documentary transactions: letter of credit, guarantee, collection, and money transfer among others.

The trading activities between Vietnamese and Chinese companies have further developed; therefore, the consolidation of safe border payment is always the top concern of banks. According to economic specialists, State agencies need to introduce measures to tighten the management over foreign exchange activities on the free market at border gates and along borderlines to enforce the regulation on foreign exchange management as well as facilitate the development of the border payment transactions through banks. This action is also a solution to address the smuggling and tax dodge at border-sharing areas. Especially, State agencies should also regulate the sets of standard receipt forms for border trade payment to help banks to follow tracks and relevant agencies to easily check the import and export payment of enterprises.

 

As for credit organisations, apart from the maintenance and consolidation of the relationship with regular clients, they should speed up the marketing activities about border trade payment to importing and exporting companies throughout the country. Customs offices at border gates are the best helpers in promulgating and introducing border payment services and international payments to companies. In addition, banks should develop the use of new payment modes for border trades such as SWIFT money transfer, L/C payment in domestic currencies and deposit guarantee; issue traveller letter of payment in domestic currencies; and continue expanding payment entrustment services for import enterprises. These services will help reduce intermediary stages of the money transfer process, ensuring payment safety for clients and facilitate the expansion of banking services.