China Overtakes U.S. as Top Export Market in One More Nation
China replaced the U.S. as the main export market for Vietnam last year.
(Bloomberg) -- China overtook the U.S. as the main export market for Vietnam last year, underscoring how the world’s No. 2 economy is growing its influence in the region.
The U.S. was the top buyer of Vietnam goods for 15 years until it was overtaken in 2017 by China, according to data from the International Monetary Fund. That shift persisted this year with Vietnam’s shipments to China jumping 33.5 percent in the first quarter from a year ago, compared with 20 percent to the U.S., according to Vietnam’s statistics agency.
Vietnam has relied on the U.S. to counterbalance its dependence on China, a dominant neighbor and geopolitical threat in the region. But with U.S. President Donald Trump turning more inward by adopting trade protectionist policies, China is filling the gap with more trade and investment in Southeast Asia.
“The center of trade for Asia has clearly shifted to China from the U.S.,” said Eugenia Victorino, an economist at Australia & New Zealand Banking Group in Singapore. “Trade protectionism isn’t helping and Asian nations will realize more and more that when it comes to trade, China now punches a heavier weight.”
China has displaced the U.S. over the past decade as the top export market for many Asian economies, including Japan, South Korea, Thailand, Indonesia, and the Philippines. India is one of the few countries in the region that still counts America as a bigger market for goods than China.
Vietnam’s exports to China surged more than 10 times to $50.6 billion in the 10 years through 2017, compared with a fourfold increase to the U.S. to $46.5 billion, according to import data compiled by the IMF.
The dong fell 0.2 percent to 22,773 per dollar as of 11:31 a.m. on Wednesday in Hanoi, taking its loss this year to 0.3 percent, according to prices from banks compiled by Bloomberg.
Young Workforce
The Southeast Asian nation has emerged in recent years as a manufacturing powerhouse with economic growth above 6 percent. Its young and low-cost workforce have been magnets for international investors like Samsung Electronics Co. and Nestle SA, which opened a factory in the country last year.
The World Bank forecast in April that Vietnam’s exports of goods and services will expand more than 13 percent annually from 2018 to 2020, driven by rising foreign direct investment in manufacturing. That will help underpin growth of 6.5 percent until 2020, among the fastest in the world, according to the Washington-based lender.
With exports accounting for almost 100 percent of gross domestic product in 2017, being overly reliant on one market can pose risks for the economy. To counter that, Vietnam is pursuing free trade deals with Japan and other countries in Europe and has also joined 10 other nations in March in signing a Trans Pacific trade pact.
“We aim to increase exports to many other markets, not just China,” said Luong Hoang Thai, head of the multilateral-trade department of the Industry and Trade Ministry. The government is also working with other nations in Southeast Asia to improve customs cooperation and develop a self-certification system to boost trade, he said.
“Vietnam really needs to diversify to more markets to avoid being dependent on Chinese buyers,” said Le Dang Doanh, a Hanoi-based economist and a member of the Committee for Development Policy of the United Nations.
“Vietnam is doing a good job, it’s very active in getting free trade deals,” said Doanh, a former prime minister adviser. “With the Pacific trade pact coming, it must be well prepared to benefit from it.”
--With assistance from John Boudreau
To contact the reporter on this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net.
To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Karl Lester M. Yap
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