In commerce, in 2000, the two-way trade revenue was valued at over US$2.5 billion, the first time to surpass the US$2-billion target set by leaders of the two countries, bringing a bright prospect for bilateral trade in the 21st century.
Since 2004, China has been the largest trade partner of Vietnam. The bilateral trade turnover increased over 25 % annually from 2001 to 2008. In 2004, the two-way trade revenue approximated US$7.2 billion, the second time the joint target set by the two governments was surpassed. The initial target was USUS$5 billion in 2005.
In 2008, the Vietnam-China trade turnover exceeded USUS$20.18 billion, 535 times the amount in 1991, becoming the third time the trade revenue target set by the two countries was surpassed. The two nations initially expected the bilateral trade turnover to reach USUS$20 billion in 2010.
Positive points in two-way trade ties
Looking back on the progress of Vietnam – China trade ties since the two nations normalised their relations, five prominent achievements have been made.
Firstly, the two countries have mutually promoted their strengths to develop their economies. The progress has been evidenced by growing trade recently.
Vietnam’s main exports to China include crude oil, coal, tropical farm products like rubber, vegetables, fruits, cashew nuts, pepper, sliced cassava, high-grade furniture, processed foods and seafood. Meanwhile, Vietnam’s major imports from China are machines, tools, equipment, steel, fertilisers, agricultural materials, chemicals, transport means, apparel materials and leather. These commodities account for more than 90 % of Vietnam’s total spending on Chinese goods.
Secondly, trade modes have developed and diversified. In the period from 1991 to 2000, the two countries mainly used cross-border trade. Since 2001 to date, the official trade channel has accounted for a majority of the bilateral trade venue. Many kinds of trade modes have been adopted, including temporary import for re-export, transit and outsourcing.
Thirdly, the relations between localities in the two nations have been expanded. Initially, only border-sharing provinces like Guangxi and Yunnan joined hands with Vietnam but now the extent has expanded to far-lying localities like Shanghai, Guangdong, Hainan and Jiangsu.
Fourthly, social aspects, living conditions of the people along the borderline have for the most part progressed. Busier importing and exporting activities together with the presence of border economic zones have enabled border-sharing localities to adjust their economic structure to match with the opening and international integrating trends.
Lastly, the two countries have created new focuses to boost two-way trade. They have directly cooperated in investing in material processing to increase the product value to meet the growing demand in each nation.
Toward trade balance
However, the trade ties between the two countries also have shortcomings. Firstly, the trade is increasingly imbalanced, with Vietnam’s growing trade deficit. In 2001, Vietnam suffered a trade deficit of USUS$200 million with China but the figure has reached USUS$11.1 billion in 2009 so far, a rise of 55 folds. In the first seven months of 2009, the trade deficit with China declined 19.2 % from the same period of 2008 but the figure was still over USUS$5.9 billion.
Secondly, although the cross-border trade results are encouraging, there are still a lot of shortcomings. Smuggling, tax evasion, trade fraud and counterfeited goods are worsening the business climate and dispiriting consumer sentiment. Thirdly, the growing trade revenue has not fully reflected the potential of the two countries.
In economic cooperation, development aids and preferential loans provided by China from 1992 to 2000 were mainly used to restore, renovate and expand factories China built previously such as Thai Nguyen steel mill, Ha Bac fertiliser plant, textile mills, Sao Vang rubber plants, Thang Long cigarette factory, Hai Duong china enterprise and Tien Phong plastic factory.
Since 2000 to date, China’s preferential loans for Vietnam have increased strongly and have been used for fields that are important for Vietnam. China has financed 10 electricity projects, 10 mining projects, five metallurgical projects, five fertiliser and chemical projects and three mechanical engineering projects.
These cooperative projects have gradually been put into operation and contributed significantly to the socioeconomic development of Vietnam. However, there still exist two shortcomings in the two-way economic ties. Firstly, many projects were completed behind schedule. Secondly, the disbursement usually progressed very slowly.
In direct investment, by December 2008, China invested nearly USUS$2.2 billion in 628 projects in Vietnam, ranking the 13th out of 64 countries and territories with investment in Vietnam. Chinese investors disbursed USUS$271 million by the end of that year.
China’s direct investment into Vietnam does not reflect its real industrial strengths. Most projects have small scale and capital, mainly focusing on animal feed processing, automobile and motorbike parts production, mining and electricity.
In fact, impressive trade results are supported by political ties between the two countries. Frequent visits by top-ranking leaders of the two nations have created firm springboards for enterprises to jump high.
Thus, the upgrading of the bilateral relationship to comprehensive strategic partnership will help the two sides solve their common problems.
Last year, the completed land demarcation and on-going sea bordering discussions have helped stabilise and strengthen the cooperative commercial and investment environment between the two countries. The sixth meeting of the Joint Government Economic Cooperation Committee and meetings of concerned bodies of the two nations have helped solve many shortcomings in two-way trade.
In the coming time, the first meeting of the Vietnam – China Commerce Subcommittee will materialise measures to step up exploitation of economic potentialities and mutual supplementation of the two countries, gradually facilitate trade and deepen the comprehensive strategic partnership.
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