Topic foreign exchange policy of china in the period 2015 2023 and implication to vietnam

International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ADVANfCED EDUCATION PROGRAMS SCHOOL OF TRADE AND INTERNATIONAL ECONOMICS - MAJOR RESEARCH PAPER ON INTERNATIONAL ECONOMICS Topic: Foreign Exchange Policy of China in the period 2015-2023 and implication to Vietnam Name: Nguyen Tuan Dat Student ID: 11200756 Major: International Ecnonomics Class: International Economics 62A Program: Advanced Educational Programs Lecturer: Assoc Prof Ph D Nguyen Thuong Lang Email: langnt@neu.edu.vn, langnguyen3300@gmail.com Semester: II 2022-2023 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang Hanoi, 2023 OUTLINE List of abbreviations List of tables List of figures Introduction Chapter 1: Exchange rate policy and economic and trade relations between China and Vietnam since 1991 10 1.1 Exchange rate policy 1.1.1 Definition 1.1.3 Exchange rate policy instruments 1.2 Economic and trade relations between China and Vietnam since 1991 Chapter 2: China's exchange rate policy from 2015-2023 2.1 Overview of China's exchange rate policy before 2015 10 10 11 11 13 13 2.1.1 Overview of China's exchange rate policy from 1949 to 1977 13 2.1.2 Overview of China's exchange rate policy from 1949 to 1977 13 2.1.3 Overview of China's exchange rate policy from 2005 to 2014 14 2.2 Analysis of China's exchange rate policy from 2015-2023 2.2.1 Analysis of China's exchange rate policy from 2015 to 2017 15 15 2.2.2 Analysis of China's exchange rate policy from 2018 to 2019 19 2.2.3 Analysis of China's exchange rate policy from 2020-2022 22 2.3 China's exchange rate policy in 2023 2.3.1 Factors affecting China's exchange rate in 2023 2.3.2 Recommendations for China's exchange rate policy in 2023 Chapter 3: Implications to Vietnam 24 24 26 27 3.1 Impact of China's exchange rate policy on Vietnam’s economy over the period 2015-2022 27 3.3 Recommendations for the government and local enterprises of Vietnam dealing with China's exchange rate policy in the short term and long term 29 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang 3.4.1 Recommendations for the government dealing with China's exchange rate policy in the short term 29 3.4.2 Recommendations for the government dealing with China's exchange rate policy in the long-run 29 3.4.3 Recommendations for Vietnam’s enterprises dealing with China's exchange rate policy in the short term 3.4.4 Recommendations for Vietnam’s enterprises dealing with China's exchange rate policy in the long term 30 31 Conclusion 33 References 34 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang List of abbreviations Abbreviation Full meaning ASEAN Association of Southeast Asian Nations CFETS China Foreign Exchange Trade System CNY Chinese Yuan GDP Gross domestic product PBOC People's Bank of China RMB Renminbi USD US dollar VND Vietnamese Dong WTO World Trade Organization List of tables Order Table Names of table Page 2.1 China’s GDP and inflation rate from 2017-2019 19 2.2 China’s GDP and inflation rate from 2019-2022 22 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang List of figures Order Figure Names of figure Page 1.1 Four Vietnam's largest trading partner in 2022 11 2.1 China's exchange rate against USD over the period 15 2015-2017 2.2 China’s GDP and inflation rate from 2015- 2017 16 2.3 China’s imports and exports value from 2015-2017 16 2.4 China’s foreign investment from 2015-2017 17 2.5 China's exchange rate against USD over the period 18 2017-2019 2.6 China’s foreign invesment in the period 2015-2017 20 2.7 China's exchange rate against USD over the period 21 2019-2022 3.1 Vietnam’s exchange rate against Chinese Yuan over the period 26 2005-2022 10 3.2 Vietnam’s imports and exports value to China from 26 2015 to 2022 11 3.3 Annual flow of FDI from China to Vietnam between 2011 and 2021 27 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang Introduction The urgency of the topic Almost every nation's economic growth is entwined with and tied to the international community in the framework of modern globalization International commerce and foreign exchange are necessary for international economic exchanges, thus each nation must establish a thorough and sensible framework for its foreign exchange policy in order to support economic development and preserve macroeconomic stability China's economy has been more integrated with the global economy since 1978 because to economic reforms and market openings China's foreign exchange policies have a significant influence on the international economy and commerce as the second-largest economy in the world Under its opening-up strategy, the government has been easing and strengthening foreign currency regulations, which has increased international commerce and capital inflows While this economic and financial interconnectedness has helped China's economy develop quickly, it has also made it more difficult to correct structural imbalances and has recently had an impact on the country's monetary policy In addition to having a significant influence on the world economy, China's foreign exchange policy has also had an impact on its economic ties with other nations, especially those of its immediate neighborhood China and Vietnam's economic and commercial ties have improved recently, and by 2020, their bilateral commerce will exceed $100 billion Vietnam's major commercial relationship is China, while China's second-largest ASEAN trading partner is Vietnam China is a significant source of foreign investment for Vietnam, while Vietnam is a significant market for Chinese products It is crucial to comprehend how China's foreign exchange policies influence Vietnam since it is a neighbor and maintains strong economic links with China For governments, entrepreneurs, and academics to successfully manage the complex Chinese foreign currency market and its ramifications for Vietnam Moreover, the years between 2015 and 2023 are essential for the economic growth of both China and Vietnam, making this the appropriate time period to examine the effects of Chinese foreign currency policy Document continues below Discover more from: Kinh tế quốc tế TMKQ11 Đại học Kinh tế Quốc dân 999+ documents Go to course Kinh tế quốc tế - dịch chuyển quốc tế vốn 30 Kinh tế quốc tế 100% (7) Chính sách tỷ giá hối đoái Việt Nam từ năm 2011 đến Kinh tế quốc tế 100% (6) Trình bày phân tích phương thức tốn tín dụng 26 chứng từ ngân hàng thương mại Việt Nam Kinh tế quốc tế 100 92% (13) THÚC ĐẨY PHỤC HỒI KINH TẾ VÀ CẢI CÁCH THỂ CHẾ SAU ĐẠI DỊCH COVID-19: ĐỀ XUẤT CHO VIỆT NAM Kinh tế quốc tế 100% (5) Chiến lược thâm nhập thị trường Việt nam Honda 17 Kinh tế quốc tế 100% (5) Cac dang bai tap mon kinh te quoc te thi cuối kỳ Kinh tế quốc tế 100% (5) International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang Research overview The literature on China's foreign exchange policy during the period from 2015 to 2023 and its implications for Vietnam is relatively limited However, there are a number of studies that have examined different aspects of this topic LIN Guijun and Ronald M SCHRAMM (2003) took a closer look at the process of China’s foreign exchange reform since 1979 The paper concluded that the core of China’ foreign exchange reform since 1979 has been a gradual transformation of its exchange allocation mechanism from one that was governed by central planning to one in which market forces play a significant role Miss Sonali Das (2019) studied the development of China’s exchange rate regime which has undergone gradual reform since the move away from a fixed exchange rate in 2005 Ana Cardoso and António Portugal Duarte (2017) analyzed the impact of the Chinese exchange policy on foreign trade with the European Union Guogang Wang (2020) studied 70 years of China’s foreign exchange market development through three historical period Trịnh, T Đ (2009) studied the China’s exchange market before and after joining the WTO Most of the studies have been conducted a long-time ago and there has been no related research about China’s foreign exchange policy and implications for Vietnam even though two countries have established a strong bilateral trade relationship Research objectives and tasks 3.1 Objectives The objective of this paper is to analyze the foreign exchange policy of China in the period of 2015-2023 and its implications for Vietnam Specifically, the research aims to: Examine the key foreign exchange policy measures implemented by China during this period, including changes in exchange rate regimes, capital control measures, and foreign exchange intervention of the government and the central bank International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang Assess the impact of these policies on China's economy and the global economy, including their effects on trade, investment, and capital flows Evaluate the implications of China's foreign exchange policy for Vietnam, including the effects on trade, investment, and capital flows, as well as any potential spillover effects on the Vietnamese economy Provide policy recommendations for Vietnam in light of the implications of China's foreign exchange policy, with the goal of minimizing negative impacts and maximizing opportunities for economic growth 3.2 Tasks In order to achieve the research objectives outlined in the previous section, the following tasks will be undertaken: 1) Introducing the topic "Foreign Exchange Policy of China in the period 2015-2023 and its implication to Vietnam" This will include the urgency of the selected topic, a review of academic articles, reports and some related information about the way the research is conducted 2) Summarizing about the close economic and trade relations between China and Vietnam since 1991 3) Analyzing the Foreign Exchange Policy of China in the period 2015-2023 and its impact on the Chinese Yuan (renminbi) and the Chinese economy Also investigating about the evolution of Foreign Exchange Policy of China, thereby making suggestions about China's exchange rate policy should be in the long-term 4) Studying the influence of Foreign Exchange Policy of China on Vietnamese’s economy and potential responses and recommendations for the government and the local enterprises in the short and long run Research object and scope Research object: China’s Foreign exchange policy over the period 2015-2023 Research scope: China’s Foreign exchange policy impact on its economy and Vietnam’s economy over the period 2015-2023 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang Research method The research will be conducted using both secondary data sources, such as academic articles, reports, and government publications such as: World Bank, OEC, Statista, China’s State Administration of Foreign Exchange Structure of the thesis In addition to the introduction, the end, the table of contents, the list of references, the topic is presented in chapters: Chapter 1: Exchange rate policy and economic and trade relations between China and Vietnam since 1991 Chapter 2: China's exchange rate policy from 2015-2023 Chapter 3: Implications to Vietnam International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang People's Bank of China (PBOC) This approach aimed to balance the need to maintain stability in the value of the renminbi, which is important for China's economic stability and its role in the global economy, with the need to allow market forces to play a role in determining the currency's value The Chinese government also continued to intervene in the foreign exchange market as necessary to prevent excessive depreciation of the renminbi, which could lead to capital outflows and destabilize the economy This intervention was mostly through the state-owned banks' purchasing or selling of foreign currencies in the open market, which affected the supply and demand of foreign currencies, thus affecting the exchange rate The PBOC also used various tools such as setting interest rates, adjusting reserve requirements, and issuing short-term liquidity loans to commercial banks to guide the market and maintain stability Chinese yuan in 2022 underwent the fastest and deepest adjustment since the major reform of the country's foreign exchange formation system in 1994 The Chinese yuan against the US dollar fell more than 13 percent in eight months - from 6.3 in March to 7.3 in November 2.2.3.2 Economic impact The government's efforts to stabilize the renminbi and maintain a relatively stable exchange rate had a positive impact on China's economic growth by providing a stable environment for trade and investment In 2020, China's GDP growth rate decreased to 2.3% due to the outbreak of COVID-19 pandemic, but rebounded to 8.1% in 2021, which showed the resilience and adaptability of China's economy in the face of adversity However, the use of capital controls continued to have a negative impact on foreign investment The government implemented stricter regulations on outbound investment and foreign currency transactions, which led to a decline in foreign investment and made it more difficult for Chinese companies to invest abroad The government's efforts to stabilize the renminbi and maintain a relatively stable exchange rate also helped to keep inflation under control The stable exchange rate helped to prevent a rapid increase in the cost of imported goods, which would have led to higher inflation Additionally, the outbreak of COVID-19 pandemic has had a significant impact on the inflation rate, and it dropped to 0.9% in 2020, but rebounded to 1.3% in 2021 24 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang The government's efforts to stabilize the renminbi and maintain a relatively stable exchange rate also helped to maintain financial stability The use of capital controls helped to prevent a rapid outflow of capital that could have destabilized the financial system However, the outbreak of COVID-19 pandemic has also put pressure on China's financial stability, and the government has implemented monetary and fiscal policies to mitigate the impact of the pandemic, such as cutting interest rates and increasing government spending 2020 2021 2022 GDP growth -2.3% 8.1% 3% Inflation rate 0.9% 1.3% 2% Table 2.2: China’s GDP and inflation rate from 2020-2022 2.3 China's exchange rate policy in 2023 2.3.1 Factors affecting China's exchange rate in 2023 2.3.1.1 Internal factors The rise and fall of the yuan in 2023 will be mostly determined by China's economic fundamentals If Chinese economic growth recovers significantly in 2023, net capital outflows will decline or potentially reverse, providing further support to the renminbi The Chinese government’s decision to abandon its zero-COVID policy since the January makes this scenario more likely, not least because that policy constituted the most powerful constraint on the effective implementation of expansionary fiscal and monetary policy Domestic and foreign investors are generally enthusiastic about the prospects for China's economic recovery and the rising value of the yuan, as a result of the optimization of pandemic responses China's yuan has rallied since the beginning of 2023, as the country eases its COVID-19 control measures and reopens its borders While household consumption will rebound in the foreseeable future, supply chains may take longer than expected to repair As a result, inflation may rise sometime in 2023 At the same time, the PBOC may need to lower interest rates to give the economy a boost The failure to strike the right balance between anti-inflation and pro-growth policies, and any misstep in implementing expansionary fiscal and monetary policy, will negatively affect the renminbi exchange rate As the PBOC stated that “China will closely watch the trend and changes in inflation and keep the prices of energy and food stable”, the fluctuations and volatility of RMB will be expected to be ensured 25 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang 2.3.1.2 External factors In 2023, the spillover effects of Fed's tightening monetary policy are expected to continue Due to the decline in economic output potential this year, the Fed will likely increase its tolerance for economic recession The monetary tightening may last longer than anticipated, and the US dollar will likely enter a second phase of appreciation Assuming all other conditions remain unchanged, the yuan exchange rate will continue to fluctuate in both directions Due to the combination of high inflation and high unemployment, there is a great likelihood that the Fed will lower interest rates gradually at the end of 2023, and the dollar's trend will be strong in the start of the year before becoming weaker As the Chinese economy is more integrated into economic and financial globalization than it was before the global financial crisis of 2008, the spillover effect of the Fed's monetary tightening on China will grow into shock, and the yuan exchange rate will be subject to increasing pressure Another important factor that could impact the yuan's exchange rate in 2023 is the ongoing trade tensions between China and other major economies such as the US and the EU If trade negotiations between China and the US continue to be rocky or if new trade disputes arise, this could negatively impact investor sentiment towards the yuan and lead to a depreciation of the currency 2.3.2 Recommendations for China's exchange rate policy in 2023 One of the key considerations for China's exchange rate policy is that it is a developing economy that is heavily dependent on exports As such, some experts recommend that China should maintain a relatively weak currency in order to make its exports more competitive on the global market This could be achieved through a variety of means, such as through intervention in the foreign exchange market to keep the value of the renminbi low, or through the use of capital controls to limit the inflow of foreign investment China's exchange rate policy in 2023 should aim to promote economic stability and growth while maintaining a balance between domestic and external factors A more marketoriented exchange rate regime, which allows for greater flexibility and responsiveness to market forces, could help to promote greater stability and efficiency in the economy A flexible exchange rate policy would enable the RMB to appreciate or depreciate in response to changes in supply and demand in the foreign exchange market This would help to reduce the impact of external shocks on the economy, such as changes in global commodity prices or shifts in international capital flows This would also make the RMB more responsive to changes in the global economy, which would help to promote greater stability in the long- 26 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang term Furthermore, it would also increase the RMB's internationalization process, and make it more attractive to be used as a global reserve currency Additionally, a more open and transparent foreign exchange market would help to promote greater efficiency and stability in the economy This would also help to reduce the country's dependence on the US dollar as the primary currency for trading and transactions, which would help to reduce China's vulnerability to external shocks It would also increase the transparency in the foreign exchange market, which would help to attract more foreign investment and boost the economy Furthermore, it is important for the government to maintain a balance between domestic and external factors in order to promote economic stability This includes, monetary policy, fiscal policy, and the use of various tools such as interest rate adjustments and capital controls The government should use these tools in a flexible and timely manner, to maintain economic stability and promote economic growth 27 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang Chapter 3: Implications to Vietnam 3.1 Impact of China's exchange rate policy on Vietnam’s economy over the period 20152022 Figure 3.1: Vietnam’s exchange rate against Chinese Yuan over the period 2005-2022 Figure 3.2: Vietnam’s imports and exports value to China from 2015 to 2022 From 2015 to 2022, China's exchange rate policy has had a significant impact on the trade deficit of Vietnam against China Over the period, China has maintained a relatively stable exchange rate policy, with a managed float of the RMB against a basket of currencies However, despite this, the RMB has appreciated against the Vietnamese Dong, making 28 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang Chinese goods more expensive than Vietnamese goods in the international market This has led to a decrease in Chinese exports to Vietnam, but it has not been sufficient to offset the large amount of goods imported from China Vietnam's imports from China have been primarily machinery, equipment, and raw materials, which are essential for the country's production and development The trade deficit between the two countries has been widening over the years, with Vietnam being unable to compete with China's manufacturing capabilities and lower labor costs This has led to a larger trade deficit for Vietnam, which has put pressure on the country's balance of payments and its economic growth Furthermore, the trade deficit has also had an impact on Vietnam's domestic production and employment, as it has made it difficult for domestic firms to compete with cheap Chinese imports This has led to a decline in domestic production, increased unemployment and reduced income for the workers A weaker Vietnamese dong against the RMB during 2015-2022 also made Vietnam more attractive to Chinese investors, as it means that their investments would be cheaper in terms of RMB Chinese companies could take advantage of the favorable exchange rate to acquire Vietnamese assets or invest in new projects in the country This led to an increase in China's FDI to Vietnam, which could bring new capital and technology to the Vietnamese economy 29 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang Figure 3.3: Annual flow of FDI from China to Vietnam between 2011 and 2021 3.3 Recommendations for the government and local enterprises of Vietnam dealing with China's exchange rate policy in the short term and long term 3.4.1 Recommendations for the government dealing with China's exchange rate policy in the short term 1) Implementing timely monetary and fiscal policies: The government may use monetary policy tools, such as adjusting interest rates, to stabilize the economy and mitigate the impacts of China's exchange rate policy Fiscal policies, such as tax breaks or subsidies, may also be used to support domestic industries and mitigate the negative impacts of China's exchange rate policy 30 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang 2) Increasing support for domestic industries: The government needs to increase support for domestic industries, such as through tax breaks, subsidies, or other forms of assistance, in order to help them compete with Chinese imports This can be done by providing financial assistance, training, and other forms of support to help domestic industries improve their productivity, efficiency and competitivenes 3) Implementing trade remedies: The government may implement trade remedies such as tariffs, quotas, or anti-dumping measures in order to protect domestic industries from Chinese imports This can be done by imposing tariffs on Chinese imports to make them less competitive, or by imposing quotas to limit the amount of Chinese imports that can be brought into Vietnam 4) Adjusting the exchange rate range: Vietnam's government can change its exchange rate range to deal with China's exchange rate policy by adjusting the band within which the Vietnamese dong can fluctuate against the Chinese yuan If China decides to devalue its currency in order to make its exports more competitive, this could put pressure on Vietnam's exports and could potentially harm its economy In response, the Vietnamese government could choose to devalue the dong by widening the band within 3% to 5% to make Vietnamese exports cheaper in yuan terms, which could help to maintain the competitiveness of Vietnamese exports vis-a-vis Chinese exports 3.4.2 Recommendations for the government dealing with China's exchange rate policy in the long-run 1) Building a more robust domestic economy: The government may focus on building a more robust domestic economy by investing in infrastructure, education, and technology, in order to increase the competitiveness of domestic industries and reduce dependence on exports This can be done by increasing government spending on infrastructure, education, and technology, and by implementing policies to support innovation and entrepreneurship Additionally, the government may also focus on improving the overall business environment in Vietnam, by implementing policies to improve infrastructure, reduce corruption and bureaucracy, and promote innovation and entrepreneurship 2) Diversifying trade partners: The government may focus on diversifying trade partners in order to reduce dependence on China and mitigate the impact of China's exchange rate policy on the economy This could include negotiating trade agreements with 31 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang other countries, and promoting trade relations with countries in other regions The government may also focus on encouraging foreign direct investment from other countries to reduce dependence on China as a major investor and to support economic growth in the long term 3) Encouraging foreign investment: The government may encourage foreign investment from other countries to mitigate the negative impacts of the exchange rate policy, and reduce the dependence on China as a major investor This can be done by providing incentives and support for foreign investors, and by promoting trade agreements with other countries 4) Developing domestic financial markets: The government may focus on developing domestic financial markets, such as by increasing access to credit and capital, and by implementing regulations to promote stability and transparency, in order to increase the resilience of the economy to external shocks 3.4.3 Recommendations for Vietnam’s enterprises dealing with China's exchange rate policy in the short term 1) Hedging currency risk: Enterprises may focus on hedging currency risk in order to mitigate the impact of China's exchange rate policy on their business This could include using financial instruments such as currency forwards, options, or swaps to protect against fluctuations in exchange rates For example, they may use currency forwards to lock in a specific exchange rate for a future date, or use currency options to protect against potential currency fluctuations Additionally, they may also engage in risk management strategy development, such as by implementing a currency risk management framework, to identify, measure, monitor, and manage currency risks 2) Adjusting prices: Enterprises may focus on adjusting prices in order to mitigate the impact of China's exchange rate policy on their business This could include adjusting prices for exports to China, or for inputs sourced from China, in order to offset the impact of changes in the exchange rate For example, they may focus on implementing pricing strategies, such as dynamic pricing or value-based pricing, to adjust prices in response to changes in exchange rates Additionally, they may also engage in pricing analysis, such as by conducting a cost-volume-profit analysis, to determine the impact of changes in exchange rates on their prices and profitability 32 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang 3) Reducing costs: Enterprises may focus on reducing costs in order to mitigate the impact of China's exchange rate policy on their business This could include reducing costs for inputs sourced from China, or for exports to China, in order to offset the impact of changes in the exchange rate For example, they may focus on implementing cost reduction strategies, such as by streamlining processes, reducing waste, or outsourcing, in order to reduce their costs Additionally, they may also focus on implementing cost management systems, such as by implementing a budgeting and forecasting system, to monitor and control their costs 4) Seeking government support: Enterprises may focus on seeking support from the government in order to mitigate the impact of China's exchange rate policy on their business This could include seeking financial or tax incentives, or participating in government-led trade missions, in order to offset the impact of changes in the exchange rate For example, they may focus on seeking financial or tax incentives, such as by applying for government grants, or by participating in government-led trade missions, in order to offset the impact of changes in the exchange rate Additionally, they may also focus on engaging with government agencies and organizations, such as by participating in trade fairs, conferences, and seminars, to stay updated on the latest trade policies and regulations, and to build relationships with government officials and other industry leaders Furthermore, they may also engage in lobbying activities, such as by providing feedback on trade policies, or by participating in advocacy groups, in order to influence government policies and regulations that affect their business 3.4.4 Recommendations for Vietnam’s enterprises dealing with China's exchange rate policy in the long term 1) Diversifying exports markets: Enterprises may focus on diversifying export markets in order to reduce dependence on China and mitigate the impact of China's exchange rate policy on their business This could include exploring new markets and building relationships with new customers in other countries For example, they may focus on expanding exports to countries in other regions, such as Europe, North America, or Africa, in order to reduce their dependence on China as a major export market Additionally, they may also engage in market research and analysis to identify new opportunities in other countries, and to develop strategies to access these markets 33 International economics project 2) Increasing competitiveness: Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang Enterprises may focus on increasing their competitiveness by investing in technology, improving production processes, and reducing costs This can help to mitigate the negative impacts of China's exchange rate policy and make the enterprises more competitive in the global market For example, they may focus on investing in automation, artificial intelligence, and other technologies, in order to improve their productivity, efficiency and competitiveness Additionally, they may also focus on improving their production processes, such as by implementing quality control systems, and by implementing lean manufacturing practices, in order to reduce costs and increase efficiency 3) Developing domestic supply chains: Enterprises may focus on developing domestic supply chains in order to reduce dependence on China for inputs and reduce exposure to China's exchange rate policy This could include building relationships with domestic suppliers, and investing in domestic production facilities Additionally, they may also focus on developing supply chain management strategies, such as by implementing supplier quality management systems, and by implementing inventory management systems, in order to improve their supply chain resilience and reduce their dependence on China 4) Investing in research and development (R&D): Enterprises may focus on investing in research and development in order to improve their products and services, and to create new opportunities This can help to mitigate the negative impacts of China's exchange rate policy and make the enterprises more competitive in the global market For example, they may focus on investing in R&D to create new products or services, or to improve existing ones, in order to increase their competitiveness and to access new markets Additionally, they may also focus on engaging in partnerships with universities, research institutions, and other organizations, in order to access new technologies and to collaborate on research projects 5) Building strategic partnerships: Enterprises may focus on building strategic partnerships with other companies, both domestic and foreign, in order to share risks, access new technologies and markets, and to increase their competitiveness in the global market For example, they may focus on building strategic partnerships with other companies, such as by forming joint ventures, or by forming strategic alliances, in order to share risks, access new technologies and markets, and to increase their competitiveness in the global market 34 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang Conclusion In conclusion, China's foreign exchange policy during the period of 2015-2023 has been a complex and evolving phenomenon The paper has shown that the policy has been driven by a combination of economic and political considerations, including a desire to boost exports, respond to domestic economic conditions, and increase China's influence in global financial markets In 2015, China made a surprise devaluation of the RMB, which led to a period of volatility in the currency's value This move was widely seen as an attempt to boost exports and respond to slowing economic growth However, the devaluation also had significant implications for other countries, particularly those with strong trade ties to China, such as Vietnam In the following years, China took steps to stabilize the currency, including the introduction of a "counter-cyclical factor" in the daily fixing of the RMB exchange rate and increased use of foreign exchange reserves to support the currency These measures helped to reduce the volatility of the RMB and stabilize the currency, but they also had the effect of limiting the flexibility of the currency and making it less responsive to market forces More recently, China has continued to allow for greater flexibility in the RMB exchange rate, with a shift towards a more market-determined exchange rate This has been accompanied by a gradual liberalization of the country's capital account, with the lifting of restrictions on foreign investment and outflows of capital These measures have helped to reduce the reliance on government intervention in the currency market and increase the role of market forces in determining the value of the RMB The implications of China's foreign exchange policy for Vietnam have been significant Vietnam's economy is heavily dependent on exports, and a stronger RMB has made Vietnamese goods more expensive in the Chinese market This has led to a decline in Vietnam's exports to China and has put pressure on the country's trade balance Additionally, as China has liberalized its capital account, there has been an influx of capital into Vietnam, which has led to increased competition in the domestic market and has put pressure on the country's currency Therefore, the Vietnam’s government and local enterprises must take timely and reasonable short-term and long-term measure to respond and take advantages of China’s exchange rate policy 35 International economics project Lecturer: Assoc Prof Ph.D Nguyen Thuong Lang References A.H (2022) Đồồng Nhân Dân t r ệt giá 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