Vietnam’s reliance on China for exports risky: experts

Bilateral trade in the first half of this year rose 17 percent year-on-year to $46.82 billion, with Vietnam’s exports accounting for $16.62 billion.

Last year China had become Vietnam’s biggest export market for the first time after the U.S. held this position for 15 years, according to data from the International Monetary Fund, as cited by Bloomberg. Exports to China had risen 61.5 percent against 2016 to $35.46 billion.

The trend has persisted this year with Vietnam’s shipments to China increasing by 24.7 percent in the first 7 months of this year compared to the same period last year, as opposed to an 8.9-percent jump to the U.S., according to data from Vietnam's General Statistics Office (GSO).

The Ministry of Industry and Trade said it is likely that two-way trade would hit $100 billion this year, a first for Vietnam.

Tran Thanh Hai, deputy head of the ministry’s import-export department, said China's demand for agricultural and aquatic products continues to rise.

Besides, China's production costs are increasing making local products less competitive against imports, he said.

In this context, economist Le Dang Doanh said it is imperative for Vietnam to diversify its export markets because relying on one market is very disadvantageous.

He said that China could put up import barriers and temporarily suspend imports from Vietnam, which can cause huge damage to Vietnamese firms.

Le Quang Trung, deputy director of Son La Province's industry and trade department, said China used to be an easy market but has recently tightened import regulations.

“We have told local exporters to make sure their products comply with requirements set by China to avoid having their goods returned.”

The World Bank has forecast Vietnam’s exports of goods and services to grow at more than 13 percent annually between 2018 and 2020, driven by rising foreign direct investment in manufacturing.

With exports accounting for more than 100 percent of gross domestic product (GDP) in 2017, being overly reliant on one market could pose risks for the economy, it warned.

It also noticed that Vietnam is pursuing free trade deals with Japan and countries in Europe, and has also joined 10 other nations to sign the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to preclude the problem.

Bloomberg said Vietnam has relied on the U.S. to counterbalance its export dependence on China, but with U.S. President Donald Trump turning more inward by adopting protectionist trade policies, China is filling the gap with more trade and investment in Southeast Asia.

GSO recently warned exporters and importers to be prepared for any eventuality given the ongoing trade war between the U.S. and China.

The U.S. imposed 25 percent tariffs on an initial $34 billion of imports from China on July 6, which then led China to respond with similar sized tariffs on U.S. products.