Trying to ease reliance on China, Vietnam increases imports from South Korea
Vietnam’s GDP has increased by 5.5 times in the last 15 years, while the trade deficit with China has increased by 171 times.
In 2001, Vietnam for the first time witnessed an excess of imports over exports in the trade with China. The trade deficit was $189 million. In 2015, it soared to $32.4 billion, or 171 times.
However, instead of the two-digit growth rate, the import turnover from China decreased in the first 11 months of 2016.
“The imports from South Korea are on the strong rise, especially electronics imports. Meanwhile, the imports from China, ASEAN and Japan have slowed down,” commented Nguyen Duc Thanh, director of VEPR (Vietnam Institute for Economic and Policy Research) when talking about Vietnam’s trade balance.
A report of the General Department of Customs (GDC) showed that by November 2016, Vietnam had imported $45 billion worth of products from China, a slight decrease of 0.06 percent compared with the last year’s same period.
Meanwhile, the growth rate in exports to China was the fastest among Vietnam’s major trade partners. With Qexport turnover of $19.6 billion to the market, the rate was nearly 27 percent.
This helped reduce the deficit in trade with China to $25.4 billion, or a 14 percent decrease compared with the last year’s same period.
Until 2000, Vietnam had always exported to China more than importING from the country.
In the last 15 years, when the trade deficit with China increased by 171 times, its GDP increased by 5.5 times only, from $35.3 billion to $193.6 billion as reported by the World Bank.
The highest trade deficit growth rate was seen in 2013 when the figure soared by 44.5 percent in compared with 2012.
Analysts commented that Vietnam has put a break on the trade deficit with China because it has increased imports from South Korea.
In the first 11 months of the year, the import turnover from South Korea increased sharply to $28.9 billion, up by 13.3 percent in comparison with the last year’s same period, while the imports from all other countries decreased.
An analyst said there are some reasons for Vietnam to tend to buy South Korean products instead of Chinese.
First, as Vietnamese have become more powerful and financially capable, they would rather import South Korean machines and equipment instead of Chinese which are cheap but have low quality.
In 2015, Vietnam imported $9 billion worth of machines and equipment from China, or 18 percent of total import turnover from the country.
Second, South Korea has become the biggest foreign direct investor in Vietnam, while South Korean enterprises tend to use machines and materials from South Korea.
Thanh Mai, VNN