Vietnam considers how to reduce its trade deficit with China

06:00 | 12/06/2020 Cooperation

(VEN) - Although Vietnamese-Chinese trade has been growing, Vietnamese exports have only accounted for a small percentage of the bilateral trade value. Vietnam needs to decrease the trade deficit if it is to reach sustainable trade with this market.

vietnam considers how to reduce its trade deficit with china

High trade deficit

Vietnam and China have been trading with each other for a long time. China has been Vietnam’s largest trade partner since 2004, while Vietnam has become China’s biggest ASEAN trade partner since 2016. Vietnam is currently the world’s eighth largest trade partner of China, with bilateral trade exceeding US$100 billion. However, Vietnam’s exports only account for less than two percent of China’s import value.

To Ngoc Son, Deputy Director of the Ministry of Industry and Trade’s Asia-Africa Market Department, said Vietnam has suffered from a high deficit in trade with China for many years partly due to the size and development level of its economy.

Son said China has become the world’s second largest economy and the world’s factory, with a very high development level and capacity to produce all kinds of goods, equipment and raw materials for worldwide supply. While Vietnam is geographically adjacent to China, its domestic production is not fully developed and its demand for imports from China is high, he said.

Another reason for the high deficit is that Vietnam mainly exports to China raw and fresh farm produce and seafood. Although Vietnam has exported some manufactured and processed goods to China, its total export value to this market remains incommensurate with the potential, Son said.

The Covid-19 pandemic has caused many foreign investors in China to move factories from China to Vietnam and other Southeast Asian countries, bringing with them equipment and machinery that increased the value of imports from China.

Market approach

Vietnam needs to reduce the deficit in trade with China as soon as possible if it is to reach sustainable trade with this market, Son said. Vietnamese enterprises need to improve production level and capacity to manufacture import substitutes to help decrease the import value from China and elsewhere. They also need to increase exports to China, especially through official trade, and minimize exports through border trade.

The Ministry of Industry and Trade recommends that enterprises export goods through official channels. However, many Chinese consigners and their Vietnamese partners are still waiting for border markets to reopen for exports once the lockdown is lifted. This has led to congestion at some sub-border gates in Vietnam’s northern mountainous provinces of Lang Son and Lao Cai and a blow to the many Vietnamese enterprises reliant for years on border trade.

“China has never been and will never be an easy-to-please market, because it is the world’s second largest economy with 400 million middle-class consumers. Businesses need to change and improve their market approach if they are to reach sustainable trade with China,” Son said.

Another potential solution to ease the trade deficit is to strengthen quality control of imported goods according to World Trade Organization (WTO) regulations and international practices to prevent imports of poor quality and avoid tuning Vietnam into a dumping ground for outdated technology.

In 2019, Vietnam exported US$41.41 billion worth of goods of different kinds to China. Thirty of the 45 major exports to China yielded more than US$100 million each. Eleven of the 30 exports brought in more than US$11 billion, including computers, electronics, components, phones and components, vegetables, fruits, fiber, footwear, garments and textiles.

Thu Phuong