VIETNAM CHINA ECONOMIC RELATIONS: PROGRESS AND PROBLEMS

1
VIETNAM CHINA ECONOMIC RELATIONSPROGRESS AND
PROBLEMS

• Dr. Dinh Van An
• President,
• Central Institute for Economic Management
• Presented at New Opportunity for the Furtherrance
  of Regional Economic Integration

2

• Content
• Vietnam China relation
• Vietnam China economic relation
• Two corridors and a belt a perspective

3
Vietnam- China Relation

• Vietnam and China have been sharing many
  similarities Both implemented transformation
  from a central-planning economy to a
  socialist-oriented market economy.
• Frequent exchanges of visits between leaders of
  the two countries laid a solid foundation for
  relationship and mutual understanding and trust.
• Under the principle of "long-term stability,
  future orientation, good-neighborly friendship
  and all-around cooperation", Vietnam - China
  relations made remarkable progress in various
  fields.

4

• Five points for the development of bilateral
  relations
• Strengthening high-level exchanges keep frequent
  contacts and continue to maintain communication
• Enhancing friendship and mutual trust,
  strengthening all-round cooperation
• Seizing all favorable opportunities to expand
  economic and trade
• Pushing forward bilateral marine cooperation and
  ensuring the completion of land border
  demarcation
• Strengthening coordination and cooperation,
  promoting multilateral cooperation, and making
  efforts for safeguarding world peace and
  promoting common development.
• Friendly relationship played an important role in
  fostering the economic cooperation and relations,
  but still exist some problems needed to be
  addressed by both countries

5
VN-CN Economic relation

• TRADE
• rapid growth in trade, from 32 mill. in 1991 to
  7.2 bill. in 2004. At present, China is the
  second biggest trading partner of Vietnam, the
  4th largest buyer of Vietnam's goods and the
  biggest seller to Vietnam.
• Cross-border trade is now gradually being put in
  order.
• Official trading channels have been increasing,
  adding more kinds of goods.
• Bilateral trade relations are also expanding in
  scale, with more Chinese businesses from inland
  and coastal provinces reaching out to Vietnam,
  and Vietnamese businesses looking beyond the
  border to China's coastal provinces and economic
  zones.

6

• The two sides' businesses have also shifted from
  trade to forming joint ventures to manufacture
  and sell products in the two countries and also
  export to third countries.
• The boost in economic and trade ties is
  attributed to hundreds of talks and meetings
  between the two countries' enterprises and a
  great number of product exhibitions held in the
  two countries

Source VNs Ministry of Trade ( of export), the
figures for 2005 onwards are estimated figures
7

• Some problems
• Yet the value of two-way trade accounts for 12
  of Vietnam's total trade turnover, but represents
  only 0.6 of China's.
• Since 2000, Vietnam have suffered an increasing
  trade deficit with China, from 200 million in
  2001 to 1.7 billion in 2004. According to
  Ministry of Trade of Vietnam, Vietnam's trade
  deficit with the Chinese market could reach US2
  billion in 2005, and is expected to continue
  increasing for the next five years
• 32 Vietnamese import products with the highest
  import turnover, were from China. The import
  turnover of these products was at 3.66 billion,
  equal to 82.2 of Vietnam's total import value
  from China.

8

• While Vietnam has exported mainly raw material,
  China has exported equipment, electronic
  appliances, garment and textile, ect. This
  somehow reflects the weaknesses of
  competitiveness of Vietnams manufacturing goods.
  
• The payment mechanism for Vietnam China trade
  is still not effective, especially at the border,
  increasing the trade risks.

9

• INVESTMENT
• By August 2005, Chinas firms invested a total
  amount of USD 665.2 millions in 324 projects.
• Chinese investors focused investment on industry
  and mining, with more than 70 of their total
  investment projects and 60 of capital
• China provide 150 million yuan (US18 million) as
  non-refundable aid to help build a Vietnam-China
  Friendship Palace.
• In the 1992-2004 period, China pledged 312
  million of ODA for Vietnam, including 50 million
  as non-refundable aid for the upgrade of a number
  of Chinese-funded projects in Vietnam, incl.
  expansion of the Thai Nguyen Steel Production
  Complex, a light railway route Hanoi- Ha Dong
  town etc..

10

• Problems
• FDI from China stands at 14th among 70 countries
  and territories, meaning the underexploitation of
  its potential.
• Vietnam is not yet an effective point in the
  regional production network, meaning low level of
  intra-industry trade.
• Vietnam and China are both FDI recipients,
  leading to competition between two countries in
  attracting FDI from higher-developed economies,
  such as EU, Japan and the US.

11

• TOURISM

12

• No of Chinese tourists to Vietnam increased
  rapidly year on year, except 2003 due to SARS. On
  average during 2000-2004, Chinese tourists
  accounted for 26.5 total international tourists
  visiting Vietnam. Number of Chinese tourists to
  Vietnam is much higher that visiting from other
  East Asian countries.
• In 2004, number of Vietnamese tourists visiting
  China is 167,700, an 30 year on year increase in
  comparison to 2003.
• Vietnam and China have a huge potential for
  cooperation in tourism industry.

13
TWO CORRIDORS AND A BELT

• In May 2004, Vietnam and China agreed to develop
  the two economic corridors and the Tonkin Gulf
  economic belt not only to speed up socioeconomic
  development of the involved cities and provinces,
  but also to facilitate trade and economic ties
  between Vietnam (and ASEAN) with China.
• Two economic corridors and the economic belt will
  form a triangle whose 3 vertices are three most
  developed cities and areas of the regions. All
  these vertices are potential in creating
  significant spillover effects in their own
  regions, despite that this effect is different
  from location.

14

• 2 corridors and a belt
• The first corridor, running from Kunming to
  Vietnams Lao Cai, Hanoi, and Haiphong, covers an
  area of 80.000 km2 with total population of 19
  million people.
• Another economic corridor will connect Chinas
  Nanning with, Vietnams Lang Son, Hanoi, Haiphong
  and Quang Ninh province. This corridor will cover
  a total amount of 60,000 km2, with total
  population of 20 million and total GDP of USD 13
  bill.
• The economic belt involve China's Guangxi,
  Guangdong, Hainan, Hong Kong and Macao, and 10
  coastal localities of Vietnam.
• The corridors have three firm bases for
  sustainable development, namely fair similarity
  in geography and natural conditions, close
  connection to the China-ASEAN free trade area,
  and strong political bonds between the two
  nations.
• These corridors are expected to provide further
  impetus to bilateral business ties. These
  corridors facilitates (i) bilateral relations
  between Vietnam and China (ii) GMS linkages and
  (iii) China-ASEAN linkage

15

• The Kunming-Lao Cai Ha Noi Hai Phong and
  Yunnan Ha Noi Hai Phong corridor will help
  implement Vietnam's policies on pushing
  socioeconomic development in its northern
  mountainous provinces and assist China in
  carrying out its strategy to "open up" the west -
  an important part of the country's overall
  economic development plan.
• These corridors will become even more important
  especially after the ASEAN-China FTA has been
  formed.
• Through these corridors, two regions will
  complement to each other through cooperation.
• Kunming and Nanning are fairly developed areas.
  Production factors of two provinces Yunnan and
  Guangxi are concentrated in these two cities.
  This corridor also facilitates transporting
  Kunmings exports to other countries through
  Vietnams ports.
• Lao Cai, Ha Noi and Hai Phong had a transport
  system going to the sea, with abundant
  inexpensive labor force and a rather vast market,
  although these provinces do not have adequate
  capital, knowledge and production technology.

16

• Two sides must focus on the adoption of
  "single-window" customs. In addition, an
  agreement on mutual recognition would be signed.
• Developing a transport infrastructure is one of
  the most important works. Railways and roads
  connecting Kunming with Lao Cai, Ha Noi and Hai
  Phong will be upgraded and a new highway linking
  Kunming to Lao Cai, Hanoi, Hai Phong and Quang
  Ninh will be built, followed by a trans-Asia
  railway line. Similarly, friendship highway,
  connecting Lang Son to Nanning should be
  improved.
• The two sides are coordinating to promote
  cross-border trade and transit trade. Tourism in
  the corridor also has great potential, as the
  area boasts many famous landscapes. The two sides
  hope to attract tourists from Europe, the Chinese
  mainland and Vietnam, with tours highlighting the
  two countries' original cultural and ecological
  features.

17

• Some issues
• Yunnan, Guangxi (China) and the northern
  provinces (Vietnam) are the poorest regions
  within their countries. This type of cooperation
  is a kind of weak-weak linkages which is not
  familiar in the world. (i.e. very little
  experiences in coodinating a weak-weak
  cooperation)
• Manufacturing of all provinces in both Vietnam
  and China is rather similar, i.e. low tech
  products and low value added, although some
  high-tech products are produced in two provinces
  of China. However, provinces/cities could be
  complemtary competitors and some could be agents.
  
• A rigorous cost benefit assessment for
  financing development of two corridors and a
  belt!
• Role of two corridors and a belt in linkaging
  ASEAN-VN- Chinas Pan PRD!

18
THANK YOU!