The Status Quo, Causes And Countermeasures Of The Trade Deficit Between Vietnam And China

Vietnam and China have been established and developed trade relationship for thousand years and especially strengthened since 90s after long time of breakdown.The gross trade value between two countries was estimated to be US$ 95.779 billion in 2015, increased by nearly 34 times compared with that in 2001. Among many problems arising during the rapid development of trade between two countries, the most serious one is Vietnam trade deficit with China.Vietnam trade deficit reached US$ 38.6 billion in 2014 which was described as Vietnam's export value to China was 2 times as many as its import value. Most of Vietnam's foreign trade deficit comes from the country's deficit with China. The major reason is the complete unbalance between Vietnam's demand and domestic supply during the process of industrialization and modernization while China, the neighboring country,becomes the world's biggest manufacturer and possesses all the most favorable geographical conditions to export goods and products to Vietnam.Although Vietnam has been promoting export to China,most of exported products are primary agricultural products and raw mineral resources when the high value products are not varied and inadequate, which cannot balance the huge deficit.The long-term Vietnam-China trade deficit has brought many negative effects to Vietnam economy. Firstly, it leads Vietnam's foreign exchange reserves to drain and Vietnam's military defense power to decline. Secondly, the Vietnam-China trade deficit seriously affects the stability of the Vietnamese currency,the CNY exchange rate against Vietnamese dong keeps increasing. In addition, the development of industry and commerce in Vietnam becomes much more difficult when domestic manufacturers are unable to compete against China's ones. Last but not least, it may worsen the trade partnership between the two countries.There' re some solutions to this issue as following: 1, Vietnamese government should provide a fair and favorable business development environment to enhance the competitiveness of local enterprises; 2, The infrastructure needs to be invested more to create better transportation; 3, The raw products and resources should be highly processed and refined to raise the goods and products value; 4, Optimizing the export structure, increasing the technological content and added value of exported products are other effective methods. Moreover,two countries should further strengthen economic and trade cooperation, focus on the development of border trade and appropriately increase China's investment to Vietnam.