INTERNATIONAL TRADE TOPIC EXPLORE TRADE AND EXPLAIN KEY FACTORS DETERMINING TRADE BETWEEN VIETNAM AND CHINA

HANOI NATIONAL UNIVERSITY UNIVERSITY OF ECONOMICS AND BUSINESS   INTERNATIONAL TRADE   TOPIC: EXPLORE TRADE AND EXPLAIN KEY FACTORS DETERMINING TRADE BETWEEN VIETNAM AND CHINA GROUP 5: Giang Quynh Trang – 19051231 Dao Thi Minh Tam – 19051201 Tran Thi Thu Trang – 19051242 Dang Thi Thanh Huyen – 19051106 Duong Thi Ngoc Anh – 19051011 Nguyen Linh Trang – 19051238 Hanoi, September, 2022 TABLE OF CONTENTS Overview of economic situation in Vietnam and China 1.1 Overview of Vietnam's economic situation 1.2 Overview of China's economic situation 2 Overview of goods trade relations between Vietnam and China 3 Reality of goods trade activities between Vietnam and China in 2020 3.1 Export 3.1.1 Export turnover of goods 3.1.2 The structure of export products 3.2 Import 10 3.2.1 Import turnover of goods .10 3.2.2 The structure of imported goods 11 3.3 Balance of trade 15 Key factors determining trade between Vietnam and China 18 4.1 Favorable geographical position between the two countries 18 4.2 Economic and political dependence between Vietnam and China 19 4.3 Market openness of Vietnam and China 20 4.4 Mutual complementarity in the structure of import and export goods 21 Conclusion 22 REFERENCES .23 Overview of economic situation in Vietnam and China 1.1 Overview of Vietnam's economic situation Vietnam is a developing country with the potential to become a bright spot in Asia in the future Owning a long coastline, bordering many countries, Vietnam has many advantages in trade with the world Vietnam's import-export sector also develops year by year thanks to that A little overview of Vietnam's import and export situation with the world in the period from 2017 to 2021 Regarding the import and export market of goods, By the end of 2020, basically the goals set out in the Commodity Import-Export Strategy for the period 2011-2020, with a vision to 2030, have all been achieved Export growth exceeded the set plan Vietnam's exports have reached most markets in the world, many products have gradually gained a firm foothold and improved their competitiveness in many markets with high quality requirements such as the EU, Japan, USA, Australia In 2021, the United States is Vietnam's largest export market with a turnover of 96.3 billion USD China is Vietnam's largest import market with a turnover of 109.9 billion USD The balance of trade in goods achieved a surplus in the entire period of the 5-year plan 2016-2020 with the trade surplus in the following year increasing higher than the previous year, thereby greatly contributing to GDP growth, job creation, and consumption goods, especially agricultural products, for farmers The trade surplus helps to raise foreign exchange reserves, stabilize the exchange rate and stabilize the macro-economy In 2020, trade surplus recorded a record level of nearly 19.1 billion USD The surplus in 2020 is higher than the surplus in 2019 ($10.87 billion), higher than the surplus in 2018 ($6.83 billion), more than times higher than the surplus in 2017 (2.11 billion USD) and nearly 11 times higher than the surplus in 2016 (1.78 billion USD) 1.2 Overview of China's economic situation As the world's most populous country, the world's second-largest economy with the highest average growth rate In 2019, China achieved a growth rate of 6.1% with a GDP per capita above 15000 USD China is a strong country in manufacturing industrial goods after the US and Germany China's spearhead economic sectors are agriculture, manufacturing, energy, and tourism As a country with a large population, China's agricultural industry must develop to meet the consumption needs of more than 1.4 billion people The main food crops are wheat and wet rice In terms of manufacturing, it accounts for about 50% of China's GDP Strengths mainly come from abundant mineral deposits, ore processing technology, iron, steel, manufacturing machinery and weapons, manufacturing automobiles, ships, aircraft and telecommunications technology In the field of consumer goods production, mainly textiles and clothing China's energy industry has many advantages because it has a large territory, many large rivers and lakes, which are favorable for the construction of hydroelectric power plants, nuclear power plants, wind power, and solar power China's tourism industry is also extremely developed when it contributed up to 30% of GDP in 2019 There is a brilliantly developed industry, shares a very long border with Vietnam, is a comprehensive partner of each other with many preferential trade policies have been signed This is really an opportunity for Vietnam to learn about economic development and take advantage of the increased trade in goods between the two countries Entering 2019, the US-China trade war occurred, and the European Union became China's most important export partner China's exports to the world are mainly industrial and consumer goods such as machinery and equipment, footwear and clothing While in the opposite direction, China's imported goods are mainly transport equipment, chemical products, agricultural, forestry and fishery products China's major trading partners are currently the European Union, the United States, ASEAN, Japan and South Korea Overview of goods trade relations between Vietnam and China From 2004 to now, China has been Vietnam's largest trading partner for many consecutive years, with bilateral trade turnover maintaining a strong growth rate China is currently Vietnam's second largest export market in the world, after the United States Vietnam is also China's largest trading partner in ASEAN, the eighth largest in the world, and the fifth largest export market and the ninth largest import market for China in the world Along with that, the two sides' continued regular maintenance of bilateral economic and trade cooperation mechanisms has promptly resolved existing problems in trade relations between the two countries, bringing economic cooperation to a new level Bilateral trade develops more and more stably in a more balanced and sustainable direction According to World Bank data, in 2018, Vietnam's total import-export turnover was more than 106 billion USD, an increase of 12.7 billion USD compared to 2017 In which, the export turnover of Vietnam Vietnam to China reached more than 41 billion USD, an increase of nearly 5.9 billion USD compared to 2017 Import turnover from China is more than 65 billion USD, an increase of more than 6.8 billion USD Figures and 2: Import and export between Vietnam and China in the period 2016-2020 Source: World Bank (2020) In 2019, the total trade turnover between the two countries increased to more than 116.8 billion USD Entering 2020, despite the strong influence of the Covid-19 pandemic, the total import-export turnover between Vietnam and China still grows to 133 billion USD Vietnam exported to China more than $48.9 billion worth of goods (up 17.95%) and imported more than $84 billion worth of goods from this neighboring country (up 11.55 percent) Reality of goods trade activities between Vietnam and China in 2020 2020 is a year of many difficulties for the economy and trade in the region and the world in general, and trade activities between Vietnam and China in particular However, with the success of both Vietnam and China in controlling the Covid-19 epidemic, the two-way trade between the two countries continued to maintain stable growth, positively contributing to the economic growth and foreign trade of the two countries each side According to preliminary statistics of the customs authority, the two-way trade turnover between Vietnam and China in 2020 has reached 133.09 billion USD, an increase of nearly 14% over the same period in 2019 3.1 Export 3.1.1 Export turnover of goods In 2020, the total import and export value of the country reached 545.36 billion USD, up 5.4% compared to the previous year In which, the value of export goods reached US$282.65 billion, up 7.0%, corresponding to an increase of US$18.39 billion and imports reached US$262.70 billion, up 3.7%, up 9, respectively 31 billion USD Regarding trade partners, import and export between Vietnam and Asia continues to account for the highest proportion (64.7%) in the total import and export value of the country Specifically, Asian countries and territories reached US$352.97 billion, up 4.2% compared to 2019, of which export value was US$140.25 billion, up 3.4% and import price was $212.72 billion, up 4.7% Figure Vietnam's exports from China in 2020 Source: trademap.org China is Vietnam's largest trading partner in Asia and worldwide In 2020, the import-export turnover between the two countries will reach more than 133 billion USD In 2020, Vietnam's export turnover to China reached 48.9 billion USD, an increase of nearly 7.5 billion USD compared to 2019, equivalent to more than 18% China is Vietnam's second largest export market (after the United States) 3.1.2 The structure of export products In 2020, Vietnam exported nearly 49 billion USD to China, an increase of 17.97% compared to 2019 The main products exported from Vietnam to China are Phones (12.5 billion USD), Circuits integrated ($8.47 billion) and NonRetail Pure Cotton Yarn ($1.84 billion) Over the past 25 years, Vietnam's exports to China have grown at an annual rate of 22.6%, from $303 million in 1995 to $49.4 billion in 2020 Chart Vietnam’s exports by commodity group in 2020 Source: Vietnam's import and export report in 2020 - Ministry of Industry and Trade According to the General Department of Customs, by 2020, there will be 11 groups of Vietnam's exports to China with a turnover of over billion USD The two largest commodity groups are computers, electronic products and components; Phones and components Next are vegetables; Seafood; cameras, camcorders and components; fiber… Figure Top 10 most exported products of Vietnam to China in 2020 Source: The data is compiled from the General Department of Customs and Trade Map ● Cell phones and components Phones from Vietnam have been exported to more than 50 countries and territories around the world China is the main market leading the consumption of this product group According to statistics of the General Department of Customs in 2020, the export of phones and components to the Chinese market reached 12.3 billion USD, accounting for 24.1% of the total export turnover of phones of the whole country and up 48.8% compared to 2019 ● Computers, electronic products & components China continues to be Vietnam's largest commodity import market, accounting for 32% of the country's total import turnover in 2020 11 Figure Vietnam's imports from China in 2020 Source: trademap.org 3.2.2 The structure of imported goods Similar to exports, in 2020 Vietnam also has two groups of goods imported from China with a turnover of 10 billion USD or more, including: Computers, electronic products and components with over 18.45 billion USD; machinery, equipment, tools and spare parts reached more than 17 billion USD In addition, there are many other groups of goods imported from China with a turnover of billion USD or more In 2020, Vietnam's trade deficit with China is still very large with a trade deficit of up to 35.3 billion USD 12 Chart Vietnam’s imports by commodity group in 2020 Source: Vietnam's import and export report in 2020 - Ministry of Industry and Trade Plastic products are the import items with the strongest growth in turnover, up 7458% in December 2020 compared to the previous month The main groups of imported goods of Vietnam with an increase in turnover are machinery, equipment, tools and other spare parts, which increased by 18%; fabrics of all kinds increased by 7%; iron and steel products increased by 9% Top 10 items that Vietnam imported the most from China in 2020 reached 65 billion USD, accounting for 77% of the total import value of items In which, the largest imports were computers, electronic products and components, with nearly 18.5 billion USD 13 Figure Top 10 most imported products of Vietnam to China in 2020 Source: The data is compiled from the General Department of Customs and Trade Map ● Computers, electronic products and components In general, for the whole year of 2020, Vietnam's import of this group of goods reached approximately $64 billion, a sharp increase of 25% compared to 2019 and accounting for the largest proportion of 24% of the total import value of the country In 2020, imports from China increased sharply and surpassed Korea to become the largest market supplying this group of goods to Vietnam Specifically, imports from China with 18.5 billion USD, up 52% over the same period in 2019 ● Machines, equipment, tools, spare parts 14 Vietnam's import value of this group of goods in 2020 increased by 37.25 billion USD, a slight increase of 1.4% compared to 2019 China continues to be the largest market supplying this group of goods to Vietnam in 2020 with a value of more than 17 billion USD, an increase of over 14% compared to 2019 ● Group of raw materials for textiles, leather and shoes (including: cotton, textile fibers, fabrics of all kinds, raw materials for textile, garment, leather, shoes) For the whole year of 2020, the total value of Vietnam's imports of this group of goods is 21.5 billion USD, down 11% compared to 2019 In 2020, China is the largest market supplying raw materials and auxiliary materials for service textile, leather and footwear industry for Vietnam, accounting for 51% with 10.9 billion USD, down more than 5% compared to the previous year In addition, imports of this group of goods also originate from Korea, Taiwan and the United States ● Cell phones and components In 2020, China and South Korea are still the two main markets supplying phones and components to Vietnam with a total value of 15.6 billion USD, accounting for 93% of the total import value of this product group In which, from China $ 7.8 billion, up 3% compared to 2019 Import turnover from China continues to increase because many phone companies, including China's Xiaomi, continuously offer models new cheap code, features suitable for the majority of young Vietnamese today In 2020, Vietnam imported CBU phones from China to reach 723.8 million USD, accounting for 46% of the total import turnover of CBU phones, of which Chinese-branded phones such as Oppo, Vivo, Xiaomi, Huawei… accounted for 74.8% of imports ● Wood and wood products 15 In 2020, China continues to be the largest supplier of wood and wood products to Vietnam, reaching $862.3 million, accounting for 33.7% of the total import turnover China is also the market with the highest growth rate among key wood and wood products supply markets for Vietnam, up 31.1% compared to 2019 3.3 Balance of trade Vietnam and China are two very old trading partners Since 2004, China has been Vietnam's largest trading partner, and from 2016 to 2020, Vietnam has become China's largest trading partner among ASEAN countries Not only that, at present, Vietnam is also China's sixth largest trading partner in the world, the scale of trade between the two sides has continuously increased over time and now has exceeded 100 billion USD two-way trade In recent years, Vietnam's exports and imports to China have increased According to The Vietnam’s General Statistics Office, among the six largest trading partners of Vietnam in 2020, China is one of the two export markets that still maintained its growth momentum in the first eight months of 2020, with an increase in 13% over the same period in 2019, reaching a turnover of US$ 27 billion, just behind the US with an increase of 19% and a turnover of US$ 46.7 billion The remaining four markets, the EU, ASEAN, Korea and Japan, all fell from 1.5% to 13.6% This is a very remarkable result compared to the previous period Specifically, in the eight months of the same period in 2019, export turnover to China decreased by 2.5%, being one of two markets that recorded a decline (the other market is the EU, which decreased by only 0.5%) In the opposite direction, China continues to be Vietnam's largest import market with an estimated turnover of 49.3 billion USD in the first eight months of 2020, however, compared to the same period in 2019, it only increased 16 slightly, 7% It is noteworthy that import turnover from China has only recorded a positive growth since August 2020, while the previous seven months always maintained a downward trend over the same period As a result, Vietnam's trade deficit with China narrowed significantly, with the trade deficit from China in the first eight months of 2020 decreasing by 11.1% over the same period, to only $22.3 billion Figure Trade balance between Vietnam and other countries in 2020 Source: trademap.org 2020 is a year of many difficulties for the economy and trade in the region and the world in general, and trade activities between Vietnam and China in particular The Covid-19 pandemic originating in China is probably the first cause affecting the trade balance of Vietnam and China in the past eight months The severe impact of the epidemic on production and business activities in the world's second largest economy caused export activities to plunge, while the demand for imported essential goods increased sharply Specifically, at the end 17 of the first quarter of 2020, when the epidemic broke out strongly in China, Vietnam's import turnover from China decreased by 18% over the same period last year The second reason, with the recently signed free trade agreements (FTAs) such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the latest is the Vietnam Free Trade Agreement - The European Union (EVFTA), many Vietnamese enterprises have also increased imports from these new markets to diversify inputs, as well as take advantage of tax incentives that are on the way down According to the General Statistics Office, the trade surplus to the EU in the first eight months of 2020 reached $13.4 billion, down 9.4% over the same period last year, of which the import increase increased by 4.7% - the highest level the highest growth among the six major trading partners; Trade deficit from ASEAN also increased by 9.8% to $4.4 billion as many tariff lines continued to be removed under commitments under the ASEAN Trade in Goods Agreement (ATIGA) The third reason is because of the impact of the US-China trade war over the past two years, a series of multinational corporations have been gradually withdrawing their production activities from China and moving to other countries The peculiarity of these corporations is to find markets with cheap labor costs, from which to produce goods to circulate around the global market Therefore, when these corporations move production facilities to other countries, the impact on the value of China's exports is inevitable The USChina trade war also increases the risk of Chinese enterprises seeking to commit trade fraud, thereby choosing Vietnam as an intermediary to export goods to the US to avoid tariff barriers Last but not least, the significant depreciation of the dong against the renminbi also contributes to making Vietnam's trade more competitive 18 Specifically, in the context of the global weakening of the US dollar, the yuan has appreciated more than 5% against the US dollar since the end of May 2020, while the dong has still managed to maintain stability against the US dollar U.S dollar As a result, the dong has depreciated by approximately 4.2% against the yuan over the same time period However, with the success of both Vietnam and China in controlling the Covid-19 epidemic, the two-way trade between the two countries continued to maintain stable growth, positively contributing to the economic growth and foreign trade of the two countries each side The Chinese market in the coming time will continue to be one of the potential markets that Vietnam needs to exploit and must develop in a more sustainable and balanced direction Key factors determining trade between Vietnam and China From the data analyzed above, it is possible to point out the main factors affecting trade between Vietnam and China: 4.1 Favorable geographical position between the two countries In addition to the similarity in culture, consumption habits, etc., bilateral trade between Vietnam and China has developed thanks to its geographical advantage The natural geographical position has made the economic relations between Vietnam and China not only necessary for the economic revival of the two countries, but also a condition for expanding multifaceted relations in the Southeast Asian region Asia (ASEAN) with the Chinese economy In recent years, bilateral economic relations between the two countries as well as within the framework of ASEAN have made strong progress, creating a material premise and cooperation mechanism to expand more rapidly in recent years next 19 Besides, China has the largest population in the world and currently has over 400 million people in the middle class, so its consumption demand is great and it is an attractive export market for many countries around the world including Vietnam In the last years, Vietnam - China trade has made new strides with very positive results With a large population, China is currently an export market that still has a lot of potential for Vietnam 4.2 Economic and political dependence between Vietnam and China China has carried out economic reforms for more than 30 years The country has maintained a high economic growth rate for a long time and has actively integrated into the global economy However, China is currently facing an unbalanced development situation The source of unbalanced development is China's pursuit of import-driven growth Economic development is mainly based on industrial development, especially heavy industry Thus, China becomes a country with great demand for natural resources to provide economic impetus Therefore, Vietnam is an ideal source of raw materials for China because of its close geographical location and abundant natural resources China has a large production scale, high capacity, large labor force, and low cost Besides, they have a well-developed scientific background With the Vietnamese market, Chinese goods to Vietnam have lower logistics costs than many other markets because of their proximity More machinery, spare parts and components from China compared to similar products from developed countries Meanwhile, because Vietnam's production level is lower than China's, Vietnam relies heavily on importing intermediate goods from China for production Objectively speaking, Vietnam's trade deficit with China is inevitable due to the disparity in development level Vietnam is in the process of integrating into the global economy, such as joining the WTO and ACFTA Vietnam is in 20 the beginning of industrialization, with a low level of economic development Vietnam is located next to the global factory because the price of Chinese products is cheaper and the product quality is higher than that of Vietnam Imports from China make up for the shortfall in industrial inputs and consumer goods for Vietnam 4.3 Market openness of Vietnam and China With a population of 1.4 billion people (accounting for 18.7% of the world), import demand is high, diversified and abundant Especially, the two provinces adjacent to Vietnam, Yunnan and Guangxi Zhuang Autonomous Region with a total of nearly 100 million people, bring direct opportunities for Vietnam to exploit cross-border trade Besides, over the years, Vietnam's macroeconomic picture has always been stable and bright In 2020, under the negative impact of the Covid-19 pandemic, Vietnam's economic growth reached 2.91%, down from previous years but is one of the few countries with positive economic growth Vietnam and China have a long border, the entire Northern border line has 76 border gates and openings, including: international border gates, main border gates, 21 auxiliary border gates and 42 openings and communication points This is a huge opportunity and convenience in transportation and trade between the two countries On the other hand, Vietnam is currently very actively participating in free trade agreements (FTAs) FTAs contribute to strengthening trade relations between our country and partners, removing trade barriers to participate more deeply in global production and supply chains The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EUVietnam Free Trade Agreement (EVFTA) to which Vietnam is a member have both come into force in 2019 and 2020 The Regional Comprehensive Economic Partnership (RCEP) was also signed This will be a "magnet" 21 creating a strong attraction for large Chinese enterprises to shift investment and production to Vietnam in the near future in order to take advantage of incentives within the framework of Trade Agreements This freedom This is also a factor contributing to promoting trade cooperation between the two countries to continue to develop sustainably 4.4 Mutual complementarity in the structure of import and export goods The mutual complementarity in the structure of import and export goods of the two countries has been fully and maximally promoted, which is an important premise for the two countries' trade turnover to grow stably and sustainably in recent years Vietnam currently exports to China main commodity groups: (1) Fuel group: crude oil, coal, metal ore, oilseeds, medicinal herbs (medicinal plants); (2) Agricultural products: food (rice, dried cassava), vegetables (especially tropical fruits such as bananas, mangoes, rambutans, dragon fruit ), tea, cashew nuts; (3) Group of aquatic products: fresh seafood, frozen seafood, some types of specialties such as snakes, turtles, turtles ; (4) Consumer goods: handicrafts, shoes, high-grade furniture, washing powder, confectionery In which, the group of agricultural - forestry - fishery products accounts for over 30% of the total turnover bilateral exports and account for over 20% of the total export turnover of the commodity group of Vietnam Meanwhile, Vietnam's imports from China are mainly industrial products for processing and manufacturing The structure of each group of imported products in Vietnam's total import turnover with China has remained quite stable year on year Among the groups of goods that Vietnam imports from China, there are groups of goods that often reach a turnover of over billion USD, such as (1) machinery, equipment, spare parts; (2) iron and steel of all 22 kinds; (3) cell phones and components; (4) chemicals; (5) products from plastics; (6) automobiles of all kinds; (7) textile and footwear raw materials Currently, the concerned ministries and branches of Vietnam are continuing to negotiate to promote the Chinese side to soon open the market for products with strong added value of Vietnam such as bird's nest, durian especially, sweet potatoes, so when these products are officially opened by China, it will create new highlights for Vietnam's export activities to China, contributing to improving Vietnam's trade deficit Male from China Conclusion The first decade of the new century saw greater economic ties between Vietnam and China 2020 is the 70th year the two countries have established and maintained diplomatic relations Despite experiencing many ups and downs in history, up to now, economic and trade relations between the two countries have been restored and developed develop rapidly The expansion of imports in both countries was driven by sustained economic growth in the two countries China has become the most important market for Vietnamese agricultural products, including cassava and cassava products, coal, rubber and rice In turn, it supplies inputs to Vietnam's expanding manufacturing industry, including mobile phones and electronic parts, apparel and textiles, and footwear for the footwear industry of Vietnam Both countries adopted market-based economic reforms, but retained a strong state role through a variety of means The difference in development level makes the two economies complement each other, and the geographical proximity also contributes to facilitate trade between the two countries The continued growth of trade between Vietnam and China is driven by the deeper integration of both countries into global production networks and added value chains through a series of free trade mechanisms With the open and complementary nature of the two economies, 23 the two countries have increasingly linked their economies through trade and investment Vietnam accepts the growing trade deficit with China as it is considered necessary to build production bases for economic development China has become Vietnam's largest trading partner and tries to use its economic leverage to get favorable conditions in economic relations The Chinese market is no longer "easy" for Vietnamese businesses However, this is an opportunity for Vietnamese businesses to recognize and improve quality right from production, trade to transportation REFERENCES Le Thi Tuyet Nga (2020) How trade turnover between Vietnam and China is affected by Covid-19 Economics and Forecasting Last accessed 5/9/2022 Accessed: https://kinhtevadubao.vn/kim-ngach-thuong-mai- giua-viet-nam-va-trung-quoc-bi-tac-dong-the-nao-boi-covid-193613.html? fbclid=IwAR0ccINd5Mz92C6WP8RGbLohsTczObtdM0zVZrJ3vxewepl mQmtCP89zmyA Nguyen Anh Thu (2020) Vietnam's border trade: Current situation and some issues raised Vietnam Journal of Science and Technology Prof.Dr Gu Xiaoxuan (2020).VIETNAM AND CHINA-VIETNAM RELATIONS TO 2020 Guangxi Chinese Academy of Social Sciences trademap.org Vietnam Briefing (2021) Vietnam Approves Labor Code for 2021 Last accessed 15 July 2021 Accessed: https://www.vietnam-briefing.com/news/vietnam-approves-labor-code2021.html/ Vietnam’s Ministry of Industry and Trade (2020) Vietnam Import and Export Report 2020 wits.worldbank.org 24 25 ... and balanced direction Key factors determining trade between Vietnam and China From the data analyzed above, it is possible to point out the main factors affecting trade between Vietnam and China: ... trade activities between Vietnam and China in 2020 2020 is a year of many difficulties for the economy and trade in the region and the world in general, and trade activities between Vietnam and. .. Balance of trade 15 Key factors determining trade between Vietnam and China 18 4.1 Favorable geographical position between the two countries 18 4.2 Economic and political dependence between