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Economists give alerts about increasing invasion of Chinese imports
While some state officials say they cannot see any problems in the trade deficit with China, economists have expressed their worries about the increase in the presence of Chinese goods in Vietnam.
By late 2010, China had become the biggest trader of Vietnam. However, the sharp excess of the imports from China over exports to the country in the two-way trade has become a headache to Vietnam.
By the end of April 2011, the trade deficit with China had reached 4.1 billion dollars so far this year. The noteworthy thing is that the trade deficit with China amounted to 84 percent of the total trade deficit of the country.
The Vietnam Center for Economic and Policy Research VEPR under the Hanoi National University, in its latest report, gave warning about the increasingly high penetration of Chinese goods, from machines and equipment to consumer goods.
The source said that the Chinese goods which have been most penetrating into Vietnam, are the ones in the fields of power, oil and gas, mechanical engineering, metallurgy, mining and chemicals – the “upstream industries”, where there are many EPC (Engineering, procurement, construction) projects are under execution. The investors of the huge projects are Vietnamese key conglomerates, while the contractors of the projects are Chinese enterprises.
Some officials of the Ministry of Industry and Trade (MOIT), when talking about Vietnam’s trade deficit, said that the trade deficit would not be a big problem at all, since Vietnam, like many other developing economies, needs to import technologies and equipment to run domestic production. In this case, the imports today will bring high values in the future.
VEPR, on one hand, agreeing that trade deficit is the problem of most of the developing economies in the world, on the other hand, still said that it would still be a problem to Vietnam since the trade deficit with the neighboring country has been accounting for an increasingly high proportion in the total trade deficit of Vietnam. Meanwhile, the pervasive values and impacts on the technologies and the society of the imports are not as high as expected.
VEPR’s Director, Nguyen Duc Thanh thinks that Chinese equipment and goods have advantages in Vietnam because they fit Vietnam’s starting point when joining the global production chain, and because they are suitable to the income of Vietnamese people.
“Contractors have been trying to bring big amounts of goods and materials to Vietnam and turn Vietnam into a trade partner who imports goods in big quantities from China,” Dr Thanh said.
The research conducted by VEPR also showed that Vietnam’s trade deficit with China has no close relation with the investment flow from the country.
“Chinese investment flow into Vietnam is really low if compared with the imports flow,” Thanh said.
Agreeing with VEPR that it is necessary to give alert about the increasing trade deficit with China, Dr Le Xuan Nghia, Deputy Chair of the National Finance Supervision Council, said that the negotiations between Vietnam and China, which aim to allow the two sides to use Chinese yuan in the trade payments may lead to bigger difficulties for Vietnam in the near future.
Dr Vo Tri Thanh, Deputy Head of the Central Institute for Economic Management CIEM, pointed out that it is necessary to pay attention to machinery, equipment and intermediate goods imported from China.
“25 dollars out of every 100 dollars worth of products imported from China are machines and equipment which relate to the story about investment and long term production capability, or the strategy story,” Thanh said.
“70 percent of the total import turnover is intermediate goods, which is also relating to a long term development story,” he added.
As for intermediate goods, more than a half of them have been put into the domestic production and consumption, while the other half have been used to make consumer goods for export.
“As such, the most important part relating to the trade deficit with China, is the import of machines and intermediate imports. If we can reduce the imports, we will be able to reduce the trade gap,” Thanh concluded.
vietnamnet, TBKTVN
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