Vietnam taking risk in excessive export reliance

By Hu Weijia Source:Global Times Published: 2019/10/28 23:28:42

A train from Vietnam passes the China-Vietnam border in Hekou county, Southwest China's Yunnan Province in 2018. Photo: IC

Vietnam is playing a dangerous game as it pumps up its export-oriented economy.

According to a Financial Times (FT) calculation, Vietnam's exports of goods and services are likely to exceed the nation's total GDP this year. This would make Vietnam the largest economy in demographic terms in the club of "super-exporters," which currently includes Luxembourg, Singapore, Malta, Ireland and China's Hong Kong.

For economies that rely highly on exports, structural imbalances make them extremely vulnerable to external economic uncertainties. According to an IMF forecast, global economic growth is expected to fall to 3 percent this year, its slowest pace since the 2008-09 financial crisis. 

At a time of weak demand in the world market and a slowing global economy, Vietnam's domestic market is too small to give the economy necessary support.

Vietnam is a large nation with a population of almost 100 million. The country can't just blindly copy the experience of Luxembourg and Malta, which have a total population of slightly over 1 million. However, Vietnam has completely linked its destiny to the global market - an extremely risky move.

Vietnam's excessive dependence on international markets is an unsustainable way to develop its export-oriented economy. US President Donald Trump has made cutting the US trade deficit a prime goal of his administration. It is unlikely that Vietnam can remain immune to growing US protectionism. 

Vietnam's economy is booming as manufacturers relocate to Southeast Asian countries with low-cost labor to offset the effects of the US-China trade war. 

However, the trend of industrial transfers makes the US trade deficit with Vietnam into a problem that deserves attention. Vietnam's increasing dependence on exports will lead to conflicts with the US sooner or later.

Despite the surge in foreign investment into Vietnam, the nation cannot replicate the complete industrial chain built in China overnight. Many high-technology enterprises assemble their products in Vietnam, but they import components and parts from China. Vietnam's excessive reliance on exports means a high dependence on China's components and parts. 

This essentially exposes the inherent vulnerabilities of the Vietnamese economy heftily dependent on its export sector. Instead of basking in the "happiness" of trade protectionism-enabled industrial transfer, the Southeast Asian nation ought to be wary of the risks lurking in its economic imbalance. 

The author is a reporter with the Global Times.


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