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Experts say trade deficit with China will be high
Predictions and calculations released by different sources all say that Vietnam imports more from China than it exports and the trade deficit will still be high in the time to come.
China is now the third biggest export market of Vietnam, after the US and Japan which imported $4.91 billion worth of products from Vietnam in 2009. The figure just accounts for 0.48 percent of the total import revenue of China, but accounts of 8.6 percent of the total export revenue of Vietnam.
In the two-way trade with China, Vietnam always imports more from China than itexports, though in 2009, due to the global economic crisis, the trade deficit growth rate slowed down, and the excess of imports over exports increased only by 3.74 percent over the previous year.
Experts believe that the trade gap with China will be wider in the time to come, partly because Vietnam is trying to restrict the exports of raw materials and minerals. Raw materials and minerals have been the key export items to China, 55-60 percent of the total export revenue.
In 2009, Vietnam exported $940 million worth of coal to China, $662 million worth of crude oil, $850 million worth of natural rubber, and $103 million worth of ores and other minerals. Of these product items, rubber is the only product which experts believe would still see export growth. Meanwhile, the exports of coal and crude oil will decrease sharply as the result of the Vietnam’s policy on restricting exports of mineral resources.
The crude oil exports decreased by 24 percent in 2009 and will decrease further in the future, because Vietnam needs crude oil to run Dung Quat oil refinery. Meanwhile, Vietnam would stop exporting coal by 2015 under the plan on coal industry development.
The absence of coal in the list of export items will lead to the sharp fall of Vietnam’s export revenue to China, because coal alone brought one billion dollar in export revenue in 2009, making up 19 percent of the total export revenue.
In theory, Vietnam can push up the export of farm produce to China and that could bring in 15-20 percent of the total export revenue. However, experts believe that Vietnam’s farm produce are not competitive with China’s products and the products from ASEAN countries. Vietnam mainly exports fruits, coffee, cassava slices and cassava starch which are materials or preliminarily processed products. Therefore, despite the high export volume, the export value of farm produce remains modest.
While Vietnam still cannot export many products to China, Chinese products have been flooding the domestic market, from the products that serve production in Vietnam to consumer goods. The cutting of the tariffs on 7000 product items from China under the ASEAN-China Free Trade Agreement will pave the way for more Chinese goods to penetrate Vietnam’s market.
Meanwhile, Vietnam still cannot take full advantages of the free trade agreement to boost exports to China. According to the Ministry of Industry and Trade, the export of industrial goods, equipments and parts to China just makes up 8.7 percent of the total export revenue to China. Meanwhile, the figure is 88.78 percent for the Philippines, 70 percent for Malaysia and 52.5 percent for Thailand.
The Ministry of Industry and Trade has set the target of obtaining the export growth rate to China at 20 percent in 2010-2015 and the import growth rate at 10 percent during the same period, which means that the targeted export growth rate is double the import growth rate. However, experts believe that Vietnam should not have high hopes on reducing the trade deficit with China.
vietnamnet, TBKTSG
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