Ngo Tuong Vy, CEO of Chanh Thu, one of Vietnam’s largest fruit exporters, says her company has received large orders from China recently for high-quality durian.
In the first half of this year, China bought more than $1.2 billion worth of Vietnamese durians, a 46% increase from the same period in 2023.
Vietnam has only been shipping fresh durians to China since 2022 when they got the green light for official import.
But on Monday the Ministry of Agriculture and Rural Development and China’s General Administration of Customs signed several protocols allowing shipments of frozen durian and fresh coconut.
With the new protocols signed, frozen durian exports are expected to reach $400-500 million this year, while fresh coconut exports are set to increase by $200-300 million.
Some other agricultural exports to China include swallow nest, sweet potato, dragon fruit, longan, rambutan, mango, jackfruit, watermelon, banana, mangosteen, grass jelly, lychee, and passion fruit.
Vietnam sold nearly $2.2 billion worth of vegetables and fruits to the country in the first half, up 33% year-on-year, making it China’s second largest source of agricultural products after Thailand.
Dang Phuc Nguyen, general secretary of the Vietnam Fruit and Vegetable Association, says China, which has a population of 1.4 billion, is a highly lucrative market that even distant countries like the U.S. and Chile seek access to.
A decade ago China’s imports of Vietnamese goods were around $15 billion annually, a figure that quadrupled to $61.2 billion in 2023.
Coffee giant Trung Nguyen Legend, which has been exporting the bean to that country for over 15 years, is a prime beneficiary of this growth.
It said it now has 15 importers, 300 secondary distributors, 30,000 retail locations and thousands of online stores in China, the fastest-growing coffee market in the world.
It estimates that out of every 18 cups of coffee sold in China one is Trung Nguyen Legend’s.
It has also opened 14 "Coffee World" stores, its global coffee shop chain, in China in less than two years since its launch.
As the world's second largest economy, China's consumption and production have facilitated growth in bilateral trade with Vietnam, especially after the two countries established a Comprehensive Strategic Partnership in 2008.
Trade between the two neighbors surged from $20.8 billion that year to nearly $172 billion in 2023.
The figure is estimated to have surpassed $112 billion so far this year, with Vietnam’s exports accounting for $32.56 billion and imports for $79.61 billion.
Key exports include electronics, rubber, fruits and vegetables, agricultural and aquatic products, and footwear.
Machinery, equipment, chemicals, plastics, feedstock for textile and footwear, steel, and construction materials are the main imports.
China is the biggest source of Vietnam's imports and the second largest export market after the U.S.
Vietnam is China's top trading partner in ASEAN and fifth largest market and ninth largest source of imports globally.
According to HSBC statistics, Vietnam-China trade is among the 20 largest in the world.
Ahmed Yeganeh, head of wholesale banking at HSBC Vietnam, tells VnExpress: "Geopolitical factors and regional free trade agreements such as the Regional Comprehensive Economic Partnership (RCEP) will continue to support and strengthen the economic relationship between China and Vietnam."
Tran Thi Hoan, associate director for the north at headhunter Navigos Search, says the demand for workers with Chinese proficiency has risen sharply this year and supply is inadequate.
Recruitment and payroll services provider Adecco concurs, says more Chinese companies are relocating due to the China Plus One strategy that involves diversifying production chains.
There used to be concern that foreign direct investment from China had not reached its full potential given the two countries’ long trading partnership and proximity, but this situation has changed noticeably in recent years.
According to the Foreign Investment Agency, China invested $4.47 billion in Vietnam last year, up 77.6% from 2022 and a 255% jump from 2018.
China also has the largest number of new projects of any foreign country this year, 540, accounting for 29.7%, as it invested $1.22 billion.
As of July 20 China had 4,754 projects with $28.5 billion registered capital, making it the sixth biggest investor.
While Chinese enterprises used to mostly invest in food processing and manufacture of garments, footwear and household goods, they have now turned to sectors like technology, electronics, renewable energy, electric vehicles, and e-commerce.
Some of their notable ventures include auto giant Chery’s joint project with Vietnamese conglomerate Geleximco, a $800 million plant that produces Omoda & Jaecoo cars.
Beijing-based electronics components producer BOE Group recently announced it would invest $277.5 million to build a smart terminal equipment factory in the Phu My 3 Specialized Industrial Park in Ba Ria-Vung Tau Province.
Roger Luo, director of Alibaba for the Asia-Pacific, said last week that Vietnam would be the first country in the region where the firm plans to introduce comprehensive logistics services.
"Since deciding to invest [in the country], we have identified Vietnam as a very important market. By 2025, in addition to completing previous services, we will also continue to expand our team in Ho Chi Minh City, Hanoi and other localities to enhance support for Vietnamese exporters."
HSBC’s Yeganeh says Vietnam stands to benefit from the supply chain shifts occurring in the region.
Vietnam's trade surplus with other regions has surged due to increased investment from China, he says.
Experts believe investment and trade between Vietnam and China will grow stronger, driven by bilateral cooperation and multilateral agreements they are part of such as the RCEP and the ASEAN-China Free Trade Agreement.
However, China is becoming increasingly strict with both trade and investment, requiring Vietnam to improve quality in all aspects.
Nguyen Dinh Tung, CEO of Vina T&T Group, one of the top fruit exporters, says his company's exports to China decreased in the first half of the year due to stricter control on cadmium residues in products.
"Wary of the stricter norms, my company did not want to rush into exporting large quantities."
With the signing of several protocols during the Communist Party General Secretary and State President To Lam’s visit to China, Vietnam is now allowed to export frozen durian and fresh coconut to that market.
Tung expects this to provide a big fillip to exports.
Concurring, Vy says businesses need to be thorough in all stages from sourcing to packaging and storage to meet China’s stricter requirements.
Vietnam must also enhance the quality of its labor, infrastructure and policies to attract more investment from Chinese companies.
Yeganeh says to attract more investment from China it is crucial for Vietnam to implement regulatory and legal changes to make business operations easier and more transparent, and provide more support to key services.
The finance industry, for example, must be prepared to provide sufficient capital to businesses, he says.
"Vietnam needs to improve its core infrastructure, as well as upgrade its energy sources and transition to greener alternatives."
He points out that the potential for economic cooperation is abundant in some sectors such as tourism, education and technology.
Vietnam should aim to become an attractive destination for Chinese visitors, he says.
"Consideration should be given to how education and technology cooperation programs can be utilized to drive innovation and support the growth of the digital economy and new economy in each country."
Along with trade, Vietnam's trade deficit has also increased from $10 billion in 2008 to $50 billion last year, the Vietnam Institute of Strategy and Policy for Industry and Trade says.
It says for Vietnam to enhance exports to China it should frame regulations on plant and animal quarantine and ensure its key products meet these standards to avoid exports getting rejected.
Besides, it should strengthen control measures to prevent imports of low-quality and unsafe goods, the institute says.
Authorities need to maintain a balance between boosting trade with China and protecting domestic businesses as products from that country, with their diverse and attractive designs and cheap prices, can pose fierce competition to local goods, it warns.
Tightening quality control for raw material imports is vital also because Vietnam aims to develop into a high-value and sustainable economy, it points out.
Other experts also recommend that Vietnam should develop its capability to supply feedstock as many Chinese firms in Vietnam still import raw materials from their home country.
Story by Vien Thong - Thi Ha
Graphics by Tat Dat
