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 equipment (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 were 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 equipment 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.
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). CITATION http://www.chinaleather.org/eng/show.php?itemid=5850
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 equipment (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 were 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 equipment 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.
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). CITATION http://www.chinaleather.org/eng/show.php?itemid=5850
