Economists urge Vietnam to prevent deluge of Chinese products

Several economists say that Vietnam has to act fast to prevent Chinese products flooding the domestic market with non-tariff barriers including strict border inspections and higher quality requirements.

According to Bloomberg, the call for non-tariff barriers has been made by  Luong Van Khoi, Deputy Director General at National Center for Socio-Economic Information and Forecast under the Ministry of Planning and Investment, and Can Van Luc, Chief Economist of the Bank for Investment and Development of Vietnam (BIDV).

Relevant ministries have also expressed worries that China will push the export of garments, leather, and furniture products to Vietnam, hurting the local economy because domestic products would not able to compete with the cheaper yuan.

China has weakened its currency to boost exports. In the last three months, the yuan has fallen 3 percent against the dollar while Vietnam’s dong has only declined 1.1 percent.

Financial expert Nguyen Tri Hieu has cautioned that the yuan could fall even further.  “China has set the yuan’s foreign exchange rate at 6.95 per dollar,” he said. “But around two years ago, that number was even lower at 6.69 per dollar. So there is a potential for the yuan to slip further.”

Nguyen Anh Duong, Deputy Head of Macroeconomic Policy division at the Central Institute for Economic Management, said that the State reduces paper work (licenses, permits, etc.) to help exporters and producers reduce costs and help them find new markets.

Earlier this month, the Vietnam Institute for Economic and Policy Research had said that the State Bank could devalue the dong to boost export competitiveness, but added that it would be a risky step since it would have ripple effects on many sectors like stocks and real-estate.

As of Wednesday, currency exchange rate was about VND23,300 per dollar.

It is has been reported that the National Center for Socio-Economic Information and Forecasting has submitted a report on potential impacts to the Ministry of Planning and Investment. In addition, Ministry of Industry and Trade is also looking at ways to stem the flooding of Chinese goods into Vietnam.

Vietnam’s biggest seller of goods was China, with its imports from that country in the first six months of this year being $30.2 billion, or 28.9 percent of its total imports. This represented a 12.3 percent jump year-on-year, according to the General Department of Vietnam Customs.

The biggest imports were of machinery, equipment and parts ($5.5 billion); fabrics ($3.43 billion); phones and accessories ($3.63 billion); iron and steel ($2.32 billion); and raw materials for the textiles, leather and footwear industries ($1.06 billion).

The U.S. remained the nation’s largest buyer of Vietnamese products, with imports of nearly $21.6 billion in the period.

The latest US-China trade spat began on July 6 with the United States slapping a 25 percent tariff on more than 800 Chinese product categories worth around $34 billion, claiming that China had violated intellectual property rights and escalated the U.S.’s trade deficit. China retaliated with a similar measure.