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NEWS UPDATES Asean Affairs        26  March 2011

Vietnam trade deficit with China surges

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The trade deficit with China has risen eight-fold since 2002 to US$12.7 billion last year, or 102 percent of the total trade deficit.

Most of the imports were of low-value goods like clothing, toys, footwear, food, and vegetables that can be produced domestically.

Cell-phone imports were worth $791 billion and vegetables and fruits, $156.13 billion, accounting for 52.1 percent and 84.5 percent of Vietnam's total imports of these goods.

With Chinese vegetables and fruits costing just half the price of their Vietnamese counterparts and keeping longer, wholesalers have no interest in buying them from farmers in Dalat.

While import taxes are no longer levied on agricultural imports from China, Vietnam has no technical barriers either, Nguyen Ba Dinh, deputy head of customs at HCMC's Cat Lai Port, said. Chinese toys are everywhere. At a shop in HCMC's District 9, for instance, only one puzzle game and a packet of plastic fruit which has been unsold for over a year were Vietnamese made. The shopkeeper said that he had stopped stocking Vietnamese toys due to their high prices.

The wholesale toy shops lining Tran Binh Street in District 6 are filled with Chinese toys. Hong Phuong, a saleswoman, told Tuoi Tre that in the past more than 30 percent of her goods used to be Vietnamese but now they are sometimes 100 percent Chinese.

At the Hanh Thong Tay Night Market in HCMC's Go Vap District, one can buy a handbag, a pair of sandals, and a belt for around VND100,000.

Thu Hue, a shopkeeper there, said Chinese goods beat their Vietnamese competitors hands down, adding she no longer buys garments made at facilities in District 6 and Binh Tan and instead buys from wholesalers in An Dong Market in District 5 and Binh Tay Market in District 6.

China is the world's workshop and so it is understandable that Vietnam imports so much from there.

But Vietnam also imports billions of dollars worth of technologies from China, also persuaded by the low prices.

Chinese enterprises are EPC (Engineering-Procurement-Construction) contractors for most coal-fired thermal power plants in Vietnam which also buys Chinese technologies for the plants. Officials from the Ministry of Industry and Trade said the reason for this is simple: their prices are just half of what is offered by G7 countries.

Vietnam also chooses Chinese contractors because they promise to arrange capital. The steel industry too uses cheap Chinese technologies though most of them are obsolete and have been banned in China since 2005.

Nguyen Tien Nghi, deputy chairman of the Vietnam Steel Association, said 29 percent of all hot rolled and cold rolled steel products are imported from China and 34 percent of structural steel. Chinese rolled steel is subject to 10 percent import tax but still costs VND300,000-500,000 per ton less than domestic products. The imports have grabbed market share from Vietnamese products whose share has fallen from 27 percent to 18 percent.

Vietnamese enterprises are very weak and lack competitiveness because of importing cheap and old technologies from China.

Vietnam hopes to cut the trade deficit to $14.2 billion this year, or 18 percent of exports, $1.8 billion higher than last year, according to the Ministry of Industry and Trade.

It has set the export and import targets of $78.8 billion and $93 billion, respectively up 10 percent and 10.7 percent.

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