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VND/yuan exchange rate skyrockets, businessmen scramble
In the last two days, businessmen in areas bordering China have been like cats on hot bricks as the VND/yuan unexpectedly has been skyrocketing.
The face of the director went suddenly pale after he received a call from Mong Cai border gate. Several minutes later, he made a series of phone calls and said: “Cancel all contracts immediately”.
The director explained that his staff had phoned from Mong Cai, saying that the Chinese yuan unexpectedly rose from VND2,200/yuan1 to VND2,540/yuan1 on June 3 in the afternoon and to VND2,750/yuan1 on June 4.
In import activities, though the transactions are carried out in Vietnamese territory, in Mong Cai town, they are carried out in Chinese Yuan. Therefore, Vietnamese businessmen have no other choice than spending VND to buy yuan.
Businessmen say that as the yuan price has increased, they will have to sell products imported from China across the border at prices higher than committed prices. Meanwhile, domestic distribution companies will not accept higher prices, as it is now not the high season of sales.
A businessman related that he read in newspapers that the state has pledged to provide enough foreign currencies to meet the trade demand at the stable exchange rate of around VND16,200/US$1. He thinks that it would be better to negotiate with the Chinese partner to make payments in dollars instead of yuan.
However, when he went to banks to ask to buy dollars, he was rejected. Meanwhile, on the black market, the dollar price has soared to VND18,000/U$1.
Who controls the foreign currency market?
Businessmen, who have trade with Chinese partners, predict that the VND/yuan exchange rate could reach the record high of VND3,000/yuan1 in some days.
Currently, with the prevailing exchange rate of VND2,750/yuan1, importers would incur the loss of VND50mil on a small batch of goods worth yuan100,000 ($275mil). In theory, they can raise the sale prices of the import products to get profit, but the market will not accept the price increases.
The noteworthy thing is that the yuan price increase benefits neither importer nor exporter.
The problem lies in the fact that export transactions are carried out right in Vietnam and in local currency. Exporters say that they may have to ‘give up the game’ if the yuan price reaches VND3,000/yuan1.
Currently, many years after Vietnam opened border gates to pave the way for the cross-border trade between Vietnam and China, commercial banks still cannot control the local foreign currency markets. All the demand for making payment and converting currencies is being satisfied by private dealers.
In Mong Cai, for example, the money market is being controlled by over 100 money conversion kiosks in the so-called ‘Mong Cai Money Market’. The escalating exchange rate proves to be unbeneficial to the national economy, especially when it is trying to curb inflation.
VNN
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