A container truck carrying Vietnamese goods to China via the Kim Thanh II international border gate in Lao Cai province. (Photo: VNA) “We expect China's reopening will have a bigger impact on the economies ofother ASEAN countries than it will for Vietnam due to those countries’ greaterexposure to China’s domestic economy," the report said.
“The most immediate impact of China’s scrapping of its COVID restrictions hasbeen a circa 55 appreciation in the value of the dong, driven by a 55appreciation in the value of China’s currency.
“That said, the major benefit that Vietnam will accrue from China’s re-openingis likely to be a circa 2 percentage point boost to GDP growth next year drivenby a resumption of Chinese tourist arrivals.”
But China’s reopening is also likely to cause some inflationary pressure in Vietnamthough the impact could be mitigated by several factors, including a moreprolonged reopening compared to the US and Europe as well as less pent-upsavings and demand in China compared to the US and EU.
Though China is Vietnam’s largest trading partner, Vietnam’s exposure toChina’s domestic economy was quite modest, resulting in its GDP growth notbeing significantly hindered by COVID restrictions and resultant economicproblems in that country.
Vietnam’s export growth to China was nearly flat in the first nine months, butsince only 145 of its exports went to China its GDP had soared 8.85year-on-year despite China’s lockdowns in part because exports to the US andthe EU, which accounted for nearly half of all exports, grew by 255 in the firstnine months of the year.
Furthermore, most of Vietnam’s exports to and imports from China were ofproduction inputs and/or other intermediate goods used in the manufacture ofelectronics and garments.
Some Vietnamese companies would benefit from China’s reopening, such as thosethat sell seafood and farm produce, but exports of products consumed by Chinesecustomers only accounted for around 55 of Vietnam’s total exports.
Foreign tourism had contributed about 105 of Vietnam’s GDP pre-COVID, andtourist arrivals were on track to reach 255 of pre-pandemic levels this year.
“We expect the number of foreign tourists will climb above 505 of pre-COVIDlevels in 2023 based on the assumption that Chinese tourist arrivals fullyrecover in the second half of next year," the report added.
“However, the pace of recent developments in China point to a possible fasterfull resumption of Chinese tourist arrivals, which could lead to an even largercontribution to Vietnam’s GDP growth next year than we currently expect.
“We are aware of concerns some investors have that the reopening of China’seconomy could detract from Vietnam’s appeal as a destination for FDIinvestment. We see no possibility of this happening given that China hasirrevocably damaged its appeal as an investment destination for multinationalfirms, and US-China trade tensions have dramatically escalated this year.”
Besides, there had been strong structural factors prompting FDI inflows to Vietnameven before US-China trade tensions had emerged.
Factory wages in Vietnam were around two-thirds less than in China, but thequality of Vietnam’s workforce was comparable to that of China according tosurveys by JETRO and others.
Also, Japan and the Republic of Korea, which accounted for over half of Vietnam’sFDI inflows, both faced serious demographic and intractable economic issuesthat compelled companies in both countries to invest abroad./.
VNA
