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Adjusting imports to ease reliance on China
It’s necessary to adjust the structure of imports from China in order to ease the trade deficit and march towards balancing trade with Vietnam’s largest trading partner, according to Bui Huy Son, Director of the Trade Policies for Asia Pacific under the Ministry of Industry and Trade.
The trade deficit with China is now very big, at nearly $13 billion. How will the trade big deficit affect Vietnam’s economy?
Trade deficit is not only the problem occurring in Vietnam, but it is also a problem for the whole world. In the past, China had a trade surplus of $140 billion. The economy has been exporting to big countries such as the US or the EU more than it has been importing from the countries.
Ten main groups of imports from China in 2010, which accounted for 70 percent of total imports from China, were mainly essential materials which served the production of goods for both local consumption and export. These included machines and equipments (22.9 percent), fabric of different kinds, garment and footwear materials (14.6 percent), steel products (10.5 percent), petroleum products (5.4 percent), chemicals (4.5 percent) and fertilizer (2.7 percent).
These were the groups of products which we still could not make, or the output and the quality still could not satisfy the domestic demand.
Meanwhile, Chinese consumer goods imported to Vietnam in the last year just accounted for a small proportion of total imports. Especially, import turnover for dairy products’ was less than $1000, animal fat was a little higher than $1000, and grain products was less than $5000.
We cannot deny that imports from China now can meet the demand of a part of the population with reasonable prices. Moreover, now Chinese goods can more easily penetrate Vietnam since Vietnam has to remove regulations on quotas and import licenses.
For all these reasons, I have to say that it is understandable for Vietnam and many other economies to have trade deficits with China.
Of course, the appearance of cheap prices from China has certainly put pressure on domestic producers. Besides, the prolonged trade deficit will badly affect the macroeconomic balance, especially foreign currency and foreign currency exchange rate policies.
In the past, we once exported to China more than we imported from the economy. However, the situation has changed since 2005. Why?
In 1991-2001, though Vietnam began opening its market and integrating into the world, the market mutual understanding and the cooperation opportunities of the two parties were still limited. Therefore, the Vietnam-China trade partnership was mostly carried out through the border gates.
At that time, the investments in Vietnam were still limited, and therefore, the demand for equipments and materials remained limited. And at that time, Chinese production and export capacity was lower than now.
Prior to 2005, Vietnam only imported low-value products from China, such as bicycles, fruits, or drinks. Meanwhile, Vietnam exported to China minerals and raw materials which had high values. Therefore, Vietnam has a trade surplus with China at that time.
However, in the next stage, with deeper global economic integration, Vietnam’s production capacity has been increasing, thereby increasing the demand for imported equipments and materials because domestic sources still cannot satisfy the demand. Therefore, the demand for importing equipments and materials has been increasing, and Vietnam, step by step, has had to import more from China than it can export to the country.
Many Vietnamese power plants now use equipments and technologies provided by China. However, the equipment and technology are low quality and do not meet the requirements of modern power plants. Meanwhile, Vietnam’s garment industry has been relying on Chinese materials. What would you say about that?
All the projects on importing machines and equipments, especially the big ones, and the projects funded by the State budget have to follow bidding laws, under which quality must be the top priority. Meanwhile, as I said above, Chinese goods have been exported not only to Vietnam, but to many other countries in the world as well.
The thought that Chinese goods are always low quality may be sourced from people who used some low quality products illegally imported to Vietnam. The products are low quality and this has made Vietnamese people think that Chinese goods are always cheap and they are low quality.
The current imports structure can truly reflect the real situation. However, I still think that we need to adjust the structure of imports from China in order to gradually balance trade with China.
What should we do to improve the trade balance with China?
In principle, we are striving to ease the trade deficit by boosting exports and adjusting the economic structure, and improving local production capabilities.
We need to increase the proportions of industrial products, products with high added value and gradually ease the exports of minerals, raw materials, and unprocessed farm produce.
Besides, the government also needs to offer preferences to the production fields which make materials for production. This will help reduce the volume of material imports (Fertilizer, garment and footwear materials).
Pham Huyen
vietnamnet
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