Vietnamese firms face high risks from US-China trade war

HCM City (VNA) – Vietnam, with its highly open economy, is facing many risks from the US-China trade war which has not shown any sign of easing, experts said at a workshop in HCM City on June 25 on the impacts of the trade war.

Vice Chairman of the Vietnam International Arbitration Centre (VIAC) Tran Du Lich said even though exports of Vietnam and China to the US are similar, it does not mean that it will be easy for Vietnamese goods to replace Chinese counterparts in the US market.

He explained that China has many large-scale firms which produce goods at big volume at competitive costs, and when countering difficulties in the US market, those firms will shift to other markets, including Vietnam. In such a situation, Vietnamese firms will face direct competition from Chinese counterparts, not only in export market but also right in the home ground.

In addition, as many Vietnamese firms import materials from China, there is real possibility that Chinese firms can take their goods to Vietnam to fraudulently change the origin of the goods for export to the US. The economist stressed the need to warn Vietnamese firms of this danger, which can cause serious damage to Vietnam’s exports.

Dr Pham Sy Thanh, director of the Chinese economy research programme at the University of Economics and Business under the Vietnam National University – Hanoi, pointed to the negative impacts of the trade war on Vietnam. As China gives priority to consuming domestic goods, Vietnam’s exports to China have dropped in the first six months of this year.

Regarding investment, the surging inflow of investment in consumer goods production is creating great pressure on domestic producers, as prices of industrial properties and labour costs will be pushed up and the competition for workers and materials will become fiercer.

In the first five months of this year, Chinese investment into Vietnam totaled 2 billion USD, 85 percent of which went into processing and manufacturing. This means export goods of Vietnam may increase in the time ahead but the real benefit will not go to domestic firms.

Thanh also urged domestic management agencies to keep strict supervision of Chinese-invested projects to prevent the use of outdated and polluting technologies.

According to Nguyen Thanh Hung, Chairman of the Import-Export Association of Dong Nai province said more Chinese investors are coming to Vietnam to build factories or purchase Vietnamese companies to produce goods for export to the US. In such circumstances, Vietnamese companies have not been able to seize the few opportunities from the trade war. Instead they are facing growing competition in the domestic market. -VNA