09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

Balance of Payments
Vietnam’s trade imbalance with China

Hà Phương Mai – Leader

Đàm Xuân Mai Trần Hoàng Thái An
Vũ Hoàng Quỳnh Trang Nguyễn Thùy Dương
Lương Nhật Linh Đậu Thị Linh Chi
 Contents
01 Introduction 02 Overview
1.1. Definition 2.1. Trade turnover
1.2. Structure of BOP 2.2. Import and export status

03 Causes 04 Effects
3.1. Exchange rate 4.1. On Vietnam
3.2. Import and export 4.2. On China
structure
3.3. Labor costs
3.4. Governance 05 Solutions
09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

1. INTRODUCTION
1.1. Definition of BOP
1.2. Structure of BOP

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

 09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

1. Introduction

1.1 Definition
o Records all economic transactions between
a country and the rest of the world over a
specific period.
o Includes all payments made by residents of
one country to residents of other countries.

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

 09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

1. Introduction

1.2. Structure

Goods & Services Primary income Secondary income Capital Financial

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

2. OVERVIEW
2.1. Trade turnover
2.2. Import and export status
2.2.1. Structure of goods
2.2.2. Vietnam’s export market
2.2.3. Opportunities

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

 09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

2. Overview 2.1. Trade turnover

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Export 13.233 14.931 17.109 21.960 35.404 41.366 41.463 48.906 55.926 57.703

Import 36.938 43.711 49.499 50.019 58.592 65.516 75.472 84.186 110.533 117.867

Export-
import 50.171 58.641 66.608 71.979 93.996 106.883 116.935 133.093 166.459 175.569
turnover
Balance
-23.704 -28.780 -32.389 -28.059 -23.189 -24.150 -34.010 -35.280 -54.607 -60.164
of trade

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

 09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

2. Overview 2.1. Trade turnover

Export Import Export-import turnover Balance of trade

2014 2015 2016 2017 2018 2019 2020 2021 2022

Vietnam is experiencing an increasing trade deficit, importing significantly less than exporting.

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

 09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

2. Overview 2.1. Trade turnover

Negative effects Positive effects
o Increasing economic dependence o Reasonable prices for
consumers
o Pressure on the domestic economy
o Support manufacturing
o Loss of opportunities for domestic industries industries in Vietnam

=> necessary to limit negative impacts, take advantage of the positive advantages
of trade deficit and practical measures need to be taken as soon as possible.

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

2. Overview Vietnam focused on exporting to China in

4 main product groups:

2.2. Import
and export Raw material Agriculture product

status
2.2.1. Structure of goods
a. Export Aquatic product Consumer goods

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

2. Overview Vietnam focused on importing from China

in 9 main product groups:

2.2. Import machinery equipment steels

and export
phones accessories chemistry

textile and
car plastic
footwear

status => Vietnam's trade deficit and heavy

2.2.1. Structure of goods dependence on imports from China are
inevitable. and the possibility that in the
b. Import coming years may remain high.

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

2. Overview
2.2. Import o Geographic location: near the border
and have international border gates

and export o Transport infrastructure: large

seaports, good infrastructure and roads

status o Economic development: developed

/investment-attracting economies
2.2.2. Vietnam’s export
market

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

2. Overview
o Geographic location: long border and
2.2. Import geographically close

o Trade agreement: ACFTA, RCEP,…

and export o Developed transportation system:
railways, roads, seaports,…
status o Potential markets: large market sizes
2.2.3. Opportunities and consumption potential

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

3. CAUSES
3.1. Exchange rate between two countries
3.2. Import and export structure
3.2.1. Import from China
3.2.2. Export to China
3.2.3. Trade deficit
3.3. Low labor costs
3.4. Governance

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

3. Causes
o The appreciation of the Chinese
3.1. Exchange rate renminbi (RMB) against the Vietnamese
dong (VND) has made Vietnamese
exports less competitive in the
Chinese market.

o Between 2013 and 2022, the Chinese

renminbi (RMB) appreciated against
the Vietnamese dong (VND) by an
average of 3.5% per year. This means
that Vietnamese exports become 3.5%
more expensive in RMB terms each year.

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

 09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

3. Causes 3.2. Structure Import from China

Machinery Textiles
Electronic
o Vietnam imports a wide Year and and Other Total
products
range of goods from China, equipment apparel
including machinery and 2013 13.5 5.4 3.0 4.7 26.6
equipment, electronic 2014 14.7 6.0 3.3 4.7 28.7
products, textiles and apparel, 2015 16.2 6.6 3.6 5.1 31.5
and other intermediate goods. 2016 17.8 7.2 3.9 5.5 34.4
2017 19.4 8.0 4.2 5.9 37.5
2018 21.2 9.0 4.5 5.9 40.6
o The reliance on imports from
2019 23.1 10.0 4.8 5.8 43.7
China makes Vietnam
2020 25.0 11.0 5.1 5.8 46.9
vulnerable to changes in 2021 27.0 12.0 5.4 5.7 50.1
the Chinese economy. 2022 29.0 13.0 5.7 6.2 53.9

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

 09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

3. Causes 3.2. Structure Export to China

Non-retail
Integrated
Year Telephones pure cotton Other Total
o Vietnam's exports to China circuits
yarn
are concentrated in a 2013 5.6 1.4 1.0 5.3 13.3
few key sectors, such as 2014 6.4 1.6 1.1 6.4 14.5
telephones, integrated 2015 7.2 1.8 1.2 7.8 16.0
circuits, and non-retail pure 2016 8.1 2.0 1.3 9.3 17.7
cotton yarn. This 2017 9.0 2.2 1.4 10.9 19.5
concentration makes 2018 10.0 2.4 1.5 12.5 21.4
Vietnam's exports to China 2019 11.0 2.6 1.6 14.3 23.5
vulnerable to changes in 2020 12.0 2.8 1.7 16.2 25.7
demand for these products. 2021 13.0 3.0 1.8 18.2 28.0
2022 14.0 3.2 1.9 20.3 30.4

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

 09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

3. Causes 3.2. Structure Trade deficit

Exports to Imports
Trade deficit
China Growth from China Growth
Year with China
(US$ (%) (US$ (%)
o Vietnam's exports to China (US$ billion)
billion) billion)
have grown at an average 2013 13.3 - 26.6 - 13.3
rate of 9.4% per year from 2014 14.5 9.0% 28.7 7.9% 14.2
2013 to 2022. 2015 16.0 10.3% 31.5 9.8% 15.5
2016 17.7 10.6% 34.4 9.2% 16.7
o This has resulted in a 2017 19.5 10.2% 37.5 9.0% 18.0
widening trade deficit 2018 21.4 9.7% 40.6 8.3% 19.2
between Vietnam and China. 2019 23.5 9.8% 43.7 7.9% 20.2
2020 25.7 9.4% 46.9 7.3% 21.2
2021 28.0 8.9% 50.1 6.7% 22.1
2022 30.4 8.6% 53.9 7.8% 23.5
1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions
 09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

3. Causes 3.3. Low Labor costs

o Vietnam's low labor costs have made it a more attractive
destination for foreign investment in labor-intensive
industries.

o Vietnam is now the world's second-largest exporter of

textiles and apparel, and China is its largest export
market.

o Vietnam's low labor costs have also made it more difficult

for Vietnamese businesses to compete with Chinese
businesses in the domestic market.

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

3. Causes o Weak IP rights protection

3.4. Governance o Complex and opaque regulatory environment

o Corruption

o Vietnam's overall governance system is also

relatively weak. (Transparency International's
Corruption Perception Index in 2022: 87th out of
180 countries)

=> difficult for the country to diversify its

economy & reduce reliance on exports to China.

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

4. EFFECTS
4.1. Effects on Vietnam
4.2. Effects on China

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

4. Effects 4.1. On Vietnam

o Substantial trade deficit poses significant vulnerabilities for
Vietnam’s economic landscape.

o The effect of Chinese production on Vietnam’s output is

lower compared to the impact of Vietnam’s demand on it.

o Influx of competitively priced Chinese imports:

▪ Influence exchange rate, lead to depreciation of VND.
▪ Increased export cost
→ reduce Vietnam’s competitiveness in the global market.

o Elevate national debt

→ potential borrowing from foreigners
1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions
 09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

4. Effects 4.2. On China

o The final demand spillover from China to Vietnam far
outweighs the reciprocal impact. For every 1 million USD
increase in Vietnam's final demand, China's production only
rises by 323 thousand dollars. Conversely, an increase of 1
million dollars in China's total final demand only marginally
affects Vietnam's production, elevating it by approximately
3,000 dollars.

o China's trade surplus enables effective control and

maintenance of its production levels.

o Any perceived or reported unfair trade actions by

Vietnam might provoke friction between the two nations.
1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions
09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

5. SOLUTIONS
5.1. Customs and border control
5.2. Cooperation with other countries
5.3. Economic reform

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

5. Solutions
Strengthening customs and border control
Detected and handled > 120,000 violations. Modern inspection equipment
01 has been invested. Vietnam needs to continue implementing with stricter
supervision & management. Increase efficiency & raise people’s awareness.

Strengthen cooperation with other countries

02 Strengthen cooperations: RCEP, VKFTA, CPTPP, EVFTA,… The government
needs to make more efforts in diplomatic negotiations → create Vietnam’s
advantages in the international market.

Promoting economic reform

03 Implement policies to support domestic manufacturing enterprises. Focus
on developing and exporting high-value-added products.

1. Introduction 2. Overview 3. Causes 4. Effects 5. Solutions

09/11/23 Advanced Finance 63B | International Economics | Topic 10 Group 7

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