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Vietnam: Trade agreements, import-export mix to ease effect of Chinese slowdown

"Vietnam has been exporting unprocessed agriculture and other primary products to China for decades. Of late, there has been strong growth in its export of higher value agriculture products, including fruits, vegetables and other horticulture products and seafood. Vietnam also exports electronic and other manufactured products to China. However, its integration in regional production chains has reversed the situation leading to an increase in Vietnam’s imports and investment from China."

 

Vietnam Trade agreements import export mix to ease effect of ChineseVietnam has been exporting unprocessed agriculture and other primary products to China for decades. Of late, there has been strong growth in its export of higher value agriculture products, including fruits, vegetables and other horticulture products and seafood. Vietnam also exports electronic and other manufactured products to China. However, its integration in regional production chains has reversed the situation leading to an increase in Vietnam’s imports and investment from China. Now, besides consumer products, the country also imports large volumes of components and parts for its manufacturing sector from China.

Impact of Chinese slowdown on Vietnam’s markets

China’s slowing economic growth is affecting growth of Vietnam’s key markets like the US, EU and Asean. This is likely to impact global demand for Vietnamese exports. Although the net impact of this slowdown on FDI from China is not clear, it will emerge as an increasingly attractive option to diversify investment risks. Though it is unlikely for China to return to previous high levels of growth, it is important to ensure that the growth rate remains high. The country accounts for nearly 20 per cent of global trade with its potential as economic partner continuing to grow.

Trade agreements to provide new opportunities

The implementation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP),Vietnam Trade agreements import export mix to ease effect and the long-anticipated EU-Vietnam trade and investment agreements (EVFTA), will provide new opportunities for Vietnam to expand and diversify its economic relations. The country will also benefit from the expected agreement on the Regional Comprehensive Economic Partnership (RCEP) in 2019. Its other bilateral initiatives, including streamlining of cross-border inspections and payments services will stimulate its economic cooperation with China.

Import-export mix to reduce global economic shocks

The negative impacts of Chinese slowdown on Vietnam’s economy will be relatively limited. Increase in exports of higher value-added agriculture, manufactured goods and services to China will remain strong. The country would face serious concerns if its growth falls to OECD country growth rates. Its exposure to global economic shocks can be reduced by providing a more diversified mix of import and export markets. The country can diversify its trade and investments through reforms under regional and economic cooperation agreements.

 
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