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

NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ADVANCED EDUCATION PROGRAMS SCHOOL OF TRADE AND INTERNATIONAL ECONOMICS - INTERNATIONAL ECONOMICS THESIS 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.co m Semester: II 2022-2023 Hanoi, 2023 International economics thesis [Type here] International economics thesis Outline [Type here] International economics thesis List of abbreviations Abbreviation RMB CFETS PBOC ASEAN [Type here] Definition International economics thesis Introduction The urgency of the topic In the context of the present globalization, the economic development of almost every country is closely linked to the international community and intertwined with each other International economic exchanges require foreign exchanges and international trade, therefore each country must develop a comprehensive and reasonable Foreign Exchange Policy framework in order to maintain promote economic growth and maintain macroeconomic stability Since 1978, China has undergone economic reforms and opened up its markets to the world, resulting in greater integration of its economy with the global economy As the second largest economy, China's foreign exchange policies have a major impact on the global economy and trade The government has been loosening and improving foreign exchange controls under its opening-up policy, which has led to growth in foreign trade and capital inflows This economic and financial integration has contributed to China's rapid economic growth, but has also created challenges in addressing structural imbalances and affected the country's monetary policy in recent years The foreign exchange policy of China has not only had a major impact on the global economy but also on the economic relations between China and other countries, particularly its neighboring countries Economic and trade relations between China and Vietnam have been growing in recent years, with bilateral trade reaching $100 billion in 2020 China is Vietnam's largest trading partner and Vietnam is China's second-largest ASEAN trading partner The two countries have a strong economic partnership, with China being a major source of foreign investment for Vietnam, and Vietnam being a major market for Chinese exports Vietnam, as a neighboring country, maintains close economic ties with China, making it essential to understand how China's foreign exchange policies affect Vietnam Understanding the intricacies of China's foreign exchange policy and its implications for Vietnam is essential for policymakers, businesses, and academics to navigate the everchanging global economic landscape Also the period between 2015-2023 is a crucial time for both China and Vietnam's economic development, making it an ideal time frame to study the impact of foreign exchange policies of China Research overview [Type here] International economics thesis 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 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 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: Introducing about the topic "Foreign Exchange Policy of China in the period 20152023 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 Analyzing about 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 [Type here] 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 Chính sách tỷ giá hối đối Việt Nam từ năm 2011 đến Kinh tế quốc tế 26 100% (6) Trình bày phân tích phương thức tốn tín dụng chứng từ ngân hàng thương mại Việt Nam Kinh tế quốc tế 100 100% (7) 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 International economics thesis Kinh tế quốc tế 100% (5) 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: Research scope: Research method The research will be conducted using both secondary data sources, such as academic articles, reports, and government publications, 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: Chapter 2: Chapter 3: [Type here] International economics thesis [Type here] International economics thesis Chapter 1: Economic and trade relations between China and Vietnam since 1991 1.1 Economic and trade relations between China and Vietnam since 1991 Economic and trade relations between China and Vietnam have been growing steadily over the past few decades Since the two countries established diplomatic relations in 1991, they have developed a comprehensive strategic partnership and have been actively engaging in economic and trade cooperation In terms of trade, China is currently Vietnam's largest trading partner, and Vietnam is China's third-largest trading partner in ASEAN The two countries have been working to strengthen their trade relationship through a number of agreements and initiatives, such as the China-ASEAN Free Trade Agreement, which came into effect in 2010 and significantly reduced tariffs on trade between the two countries In 2019, the bilateral trade between China and Vietnam has reached $107 billion, and continues to grow In terms of investment, China is one of the largest foreign investors in Vietnam, with Chinese companies investing heavily in Vietnam's manufacturing and infrastructure sectors Chinese investment has been a key driver of economic growth in Vietnam in recent years, and has played an important role in the country's modernization and development 1.2 Vietnam’s dependence on China’s imported products However, there have also been challenges in the economic and trade relationship between China and Vietnam One of the main challenges has been the issue of trade imbalance, with China's exports to Vietnam being much higher than its imports from Vietnam China and Vietnam share a long border of 1,306 km, which has facilitated bilateral trade since the normalisation of bilateral relations in 1991 The two-way trade has grown dramatically, and China has been Vietnam’s largest trading partner since 2004 The structure of bilateral trade, however, reveals Vietnam’s substantial dependence on China This has been a source of tension between the two countries, and both sides have been working to address this issue through various measures such as increasing Vietnam's exports to China and encouraging more investment in Vietnam Vietnam’s trade deficit with China has grown rapidly since 2001, and its heavy dependence on Chinese imported products creates vulnerabilities in its entire production chain Vietnam has relied heavily on China for intermediate goods (inputs used to produce final goods or finished products) such as fertilizers, pesticides for animal feed and raw materials: petroleum and gas, plastics, rubber, wood and chemicals and input materials for the production of export products such as textiles, footwear, plastics, computers and electronic goods… In every product, China has always been the first and second supplier to Vietnam [Type here] International economics thesis index of 13 currencies in an effort to shift markets away from interpreting renminbi exchange rate movements as being driven only by its connection to the U.S dollar This move is a step towards greater exchange rate flexibility and making the Renminbi a more internationally recognized currency However, despite these moves, the RMB started to depreciate against the US dollar in this period as a result of China's economic slowdown and the US Federal Reserve's decision to raise interest rates This led to concerns about capital flight and the potential for a rapid depreciation of the RMB In response, the Chinese government intervened in the market to prevent a rapid depreciation of the RMB, by buying RMB with foreign currency reserves and tightening capital controls In 2016, the PBOC implemented a new mechanism to determine the daily fixing rate of the CNY, which allowed the market forces to play a bigger role in determining the exchange rate This move was seen as a step towards greater exchange rate flexibility However, the rapid depreciation of the CNY in early 2016 prompted the PBOC to take more aggressive steps to support the currency These efforts were initially successful in stabilizing the CNY, but they also led to a decline in foreign investment and increased uncertainty in global financial markets In response to the depreciation, the People's Bank of China (PBOC) intervened in the foreign exchange market, selling large amounts of its foreign exchange reserves to support the RMB The PBOC also introduced a new mechanism for setting the daily RMB fixing rate, which it said would be based more on market forces Additionally, the Chinese government announced a series of measures to curb capital outflows and stabilize the RMB, including tighter controls on cross-border capital flows and stricter regulations on foreign exchange transactions These measures were aimed at preventing a rapid depreciation of the RMB, which could have destabilized the Chinese economy and financial markets Despite these efforts, the RMB continued to depreciate against the US dollar throughout 2016, hitting an eight-year low in December This depreciation of RMB and other measures taken by the Chinese government during 2016 indicate that China's exchange rate policy shifted to more market-oriented and flexible approach, with less emphasis on maintaining a stable exchange rate against the US dollar In 2017, the CNY continued to depreciate against the USD, but at a slower pace than in previous years This was partly due to a stabilizing Chinese economy and a rebound in exports, as well as a more cautious approach by the PBOC in managing the exchange rate The People's Bank of China (PBOC) also intervened in the foreign [Type here] International economics thesis exchange market, buying large amounts of its foreign exchange reserves to support the RMB Also in this year, China's exchange rate policy shifted towards a more marketoriented and flexible approach, with a greater emphasis on allowing market forces to play a greater role in determining the RMB exchange rate Additionally, the government announced a goal to open up the domestic financial market, liberalize the interest rates, and increase the RMB's global usage Despite the measures taken by the Chinese government during 2017, the RMB continued to appreciate against the US dollar, reaching a two-year high in December This appreciation of RMB and other measures taken by the Chinese government during 2017 indicate that China's exchange rate policy shifted to a more market-oriented and flexible approach, with less emphasis on maintaining a stable exchange rate against the US dollar 2.2.1.2 Economic impact The period of 2015-2017 saw significant changes in China's foreign exchange policy, which had a significant impact on the Chinese economy One of the key changes was the transition to a more flexible exchange rate regime in 2015, which led to a depreciation of the renminbi Overall, China's exchange rate policy from 2015 to 2017 had a mixed impact on the country's economy to 2017 had a significant impact on the 12 country's 1.5 11.5 % Trillion USD China's exchange rate policy from 2015 2.5 12.5 11 10.5 10 2015 2016 GDP GDP and inflation The depreciation of the renminbi had a mixed impact on China's trade and investment 0.5 relations with other countries On one hand, it made Chinese goods cheaper in 2017 Inflation rate global markets, which led to an increase in exports and supported economic growth On the other hand, it also increased the cost of imports, which led to a trade deficit and had a negative impact on the balance of payments Additionally, the depreciation of the renminbi also led to an increase in inflation, as the cost of imported goods rose Another important aspect of China's foreign exchange policy during this period was the use of capital controls The restrictions on foreign currency purchases and [Type here] International economics thesis increased scrutiny of outbound investment led to a decline in foreign investment in China and made it more difficult for Chinese companies to invest abroad This had a negative impact on economic growth, as foreign investment is an important source of funding for Chinese companies and is a key driver of economic growth Additionally, the capital controls also made it more difficult for Chinese companies to access foreign capital, which had a negative impact on the country's ability to participate in global trade and investment The depreciation of the renminbi and the 3.4 3.33 use of capital controls also had an impact 3.3 on Trillion USD 3.2 China's financial stability The depreciation of the renminbi led to a decline in foreign exchange reserves, which raised 3.1 3.01 3 concerns about the ability of the Chinese government to maintain financial stability 2.9 Additionally, the capital controls also raised concerns about the potential for a financial 2.8 2015 2016 2017 crisis in China, as the restrictions on foreign currency purchases and increased scrutiny of outbound investment have led to a decline in foreign investment, which has made it more difficult for Chinese companies to access foreign capital and may lead to a liquidity crunch To summarize, China's foreign exchange policy in the period of 2015-2017 had a significant and mixed impact on the Chinese economy The depreciation of the renminbi supported economic growth but also led to a trade deficit, inflation and a decline in foreign exchange reserves The use of capital controls had a negative impact on foreign investment and financial stability, which could lead to a liquidity crunch 2.2.2 Analysis of China's exchange rate policy from 2018 to 2019 2.2.2.1 Policy description and its impact on CNY China's exchange rate policy from 2018 to 2019 was heavily influenced by the trade tensions between China and the United States The RMB's exchange rate was affected by the trade war, with the RMB depreciating against the US dollar due to the uncertainty caused by the trade tensions [Type here] International economics thesis 6.95 6.91 6.9 Yuan per dollar 6.85 6.8 6.76 6.75 6.7 6.65 6.62 6.6 6.55 6.5 6.45 2017 2018 2019 In 2018, China's exchange rate policy was focused on maintaining stability in the value of the Chinese Yuan (also known as the Renminbi or CNY) against a basket of other currencies The Chinese government uses a managed float system to set the value of the Yuan, rather than allowing it to be determined by market forces The central bank, the People's Bank of China, intervenes in the foreign exchange market to buy or sell Yuan in order to keep the exchange rate within a certain range In 2018, the government's goal was to prevent sharp fluctuations in the exchange rate, which could have negative impacts on the Chinese economy The Chinese government also sought to keep the exchange rate competitive in order to support exports and boost economic growth However, there were concerns that the Chinese government was manipulating the exchange rate to make the Yuan artificially weaker than its true market value, which drew criticism from other countries and international organizations In 2019, the Chinese government announced that it would allow the RMB to fluctuate more freely against the US dollar and other currencies, in order to provide more flexibility in the exchange rate and to reduce the impact of the trade tensions on the RMB However, the year was marked by increasing pressure on the Chinese government to allow the Yuan to appreciate against the US dollar This pressure came from the United States and other countries, which accused China of devaluing the Yuan to make its exports more competitive Additionally, there were concerns that a weaker Yuan could exacerbate the trade deficit between China and the United States In response to these pressures, the Chinese government allowed the Yuan to appreciate against the US dollar during the first half of 2019 However, later in the year, the trade tensions between the United States and China escalated, and the Chinese government began to intervene in the foreign exchange market to prevent the Yuan from appreciating too much Additionally, the Chinese central bank introduced measures to stabilize the currency, including cutting reserve requirements for banks and lowering interest rates The government also made efforts to reduce the dependence on the US dollar as the primary currency for trading and transactions, and began to create a market-oriented exchange rate system This was done to provide more stability and predictability in the economy Despite these efforts, the Yuan depreciated against the US dollar at the end of 2019, due to the uncertainty surrounding the US-China trade negotiations and the global economic slowdown 2.2.2.2 Economic impact [Type here] International economics thesis 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 2018, China's GDP growth rate was 6.6%, which was a slight decrease from the previous year, but still relatively stable However, in 2019, China's GDP growth rate decreased to 6.1%, which was the slowest in nearly three decades, due to the trade tensions with the United States, and the impact of the global economic slowdown 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 consumer price index (CPI) inflation rate remained relatively stable during this period, averaging around 2% in 2018 and 2019, which was within the government's target range.X GDP growth Inflation rate 2017 6.9% 1.6% 2018 6.7% 2.1% 2019 6.1% 2.9% 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 This had a negative impact on economic growth, as foreign investment is an important source of funding for Chinese companies and a key driver of economic growth 250 Billion USD 200 150 100 50 2017 2018 2019 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 Additionally, the central bank also implemented stricter regulations on [Type here] International economics thesis currency transactions which helped to prevent financial instability However, the trade tensions with the United States and the impact of the global economic slowdown had also put pressure on the renminbi, and the government had to intervene in the foreign exchange market to prevent excessive depreciation of the renminbi In conclusion, China's foreign exchange policy in the period of 2018-2019 had a positive impact on the Chinese economy by providing a stable environment for trade and investment, but the use of capital controls had a negative impact on foreign investment 2.2.3 Analysis of China's exchange rate policy from 2020-2022 2.2.3.1 Policy description and its impact on CNY China's exchange rate policy from 2020 to 2022 was heavily influenced by the global economic impact of the COVID-19 pandemic The RMB's exchange rate was affected by the economic uncertainty caused by the pandemic, with the RMB appreciating against the US dollar 6.91 6.9 6.9 Yuan per dollar 6.8 6.73 6.7 6.6 6.5 6.45 6.4 6.3 6.2 2019 2020 2021 2022 In 2020, China's exchange rate policy continued to focus on maintaining stability in the value of the Chinese Yuan (CNY) against a basket of other currencies However, the year was marked by a number of challenges and disruptions to the global economy due to the outbreak of COVID-19 pandemic The sudden and severe global economic downturn led to a significant depreciation of the Chinese Yuan against the US dollar in the early part of the year However, as the Chinese economy began to recover more quickly than other major economies, the Chinese central bank intervened in the foreign exchange market to prevent the Yuan from depreciating too much Additionally, the central bank implemented measures to stabilize the currency, such as lowering interest rates and cutting reserve requirements for banks Despite these efforts, the Chinese Yuan depreciated against the US dollar throughout the year, due to the economic uncertainty caused by the pandemic and the tensions between the US and China Furthermore, the US government also accused China of currency manipulation and the US President signed an [Type here] International economics thesis executive order allowing for tariffs on goods from countries that undervalue their currencies The Chinese government, however, denied the accusations and argued that the depreciation of the Yuan was a result of market forces China's exchange rate policy in 2021 has been aimed at maintaining a balance between exchange rate stability and market flexibility The Chinese government has been using a managed float system to determine the value of the renminbi, which allows the currency to fluctuate within a 2% band while also being guided by a daily reference rate set by the 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 rate, adjusting reserve requirements, and issuing short-term liquidity loans to commercial banks to guide the market and maintain stability 2.2.3.2 Economic impact 2.2.4 Outlook for China's exchange rate policy in 2024 2.3 Recommendations China's exchange rate policy be in the long-term China's exchange rate policy in the long-term should aim to promote economic stability and growth while maintaining a balance between domestic and external factors A more market-oriented 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-term [Type here] International economics thesis 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 Overall, China's exchange rate policy in the long-term should aim for a marketoriented exchange rate regime that allows for greater flexibility and responsiveness to market forces, greater stability and efficiency in the economy, a more open and transparent foreign exchange market, and a balance between domestic and external factors This would help to promote economic stability, increase the RMB's internationalization and reduce the country's dependence on the US dollar as the primary currency for trading and transactions [Type here] International economics thesis Chapter 3: Implication to Vietnam 3.1 Impact of China's exchange rate policy on the balance of payments between China and Vietnam over the period 2015-2022 160 137.9 140 120 104 100 77.3 80 69.7 58.7 60 55.5 2014 49.4 35 40 20 109.85 91.2 16.6 2015 41.2 41.5 21.2 2016 2017 2018 Export 2019 2020 2021 2022 Import 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 Renminbi (RMB) against a basket of currencies However, despite this, the RMB has appreciated against the Vietnamese Dong (VND), making 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 [Type here] International economics thesis 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 In addition, the appreciation of the RMB has made Chinese goods even more competitive in the Vietnam market, as they are relatively cheaper than Vietnamese goods 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 Overall, China's exchange rate policy has had a significant impact on the trade deficit of Vietnam against China from 2015 to 2022 The appreciation of the RMB has made Chinese goods more competitive in the Vietnam market, resulting in a larger trade deficit for Vietnam and putting pressure on the country's balance of payments and economic growth 3.2 Impact of China's exchange rate policy on Vietnam's economy over the period 2015-2022 3.3 Recommendations for the goverment 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 goverment 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 the 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 the China’s exchange rate policy 2) Encouraging exports diversification: The government may encourage firms to diversify their export markets and reduce dependence on China, which can help to mitigate the negative impacts of China's exchange rate policy This can be done by providing incentives and support for firms to explore new markets, and by promoting trade agreements with other countries 3) Increasing support for domestic industries: The government need 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 [Type here] International economics thesis by providing financial assistance, training, and other forms of support to help domestic industries improve their productivity, efficiency and competitivenes 4) 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 3.4.2 Recommendations for the goverment dealing with China's exchange rate policy in the long term 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 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 the 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 [Type here] International economics thesis 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 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 2) Increasing competitiveness: 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 [Type here] International economics thesis 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 [Type here] International economics thesis Conclusion [Type here] International economics thesis Reference [Type here]