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Xinhua Insight: Vietnam's provocations sour economic ties

English.news.cn   2014-07-13 21:42:08

HAIKOU, July 13 (Xinhua) -- The once-bustling mahogany furniture trade fair at a port in south China's Hainan Province is seeing shrinking orders as recent clashes between China and Vietnam in the South China Sea have soured trade.

Data from the general customs of Vietnam showed that the country's exports reached 5.1 billion U.S. dollars in the first half of May, down by 29.9 percent month-on-month, while the trade volume of its foreign direct investment (FDI) enterprises totaled 6.68 billion U.S. dollars, down 15.2 percent.

Bilateral ties between China and Vietnam have been strained as Vietnam has illegally disturbed China's oil rig operations in the Xisha Islands, weighing on economic vitality, said Li Jinming from the Research School of Southeast Asian Studies at Xiamen University.


"I only sold two pieces of Vietnamese rosewood furniture in the past month. I sold at least 10 pieces each month previously," said Chen Lianying, a 36-year-old salesman at the furniture fair in west Hainan's Dongfang port, which has been conducting cross-border trade with Vietnam since 1996 and is looking forward to opening barter trade between border inhabitants of the two countries.

"Our business with Vietnam has declined sharply this year, and so did the cross-border market in neighboring Guangxi. We are now reviewing our push for opening barter trade, as the current spat between the two countries may impact trade," said Fu Xianfeng, vice director of the port city's business bureau.

This is only a glimpse of the impact seen after a series of riots hit Chinese companies in Vietnam following the oil rig disruptions in mid-May. The deadly violence has left five Chinese nationals dead and injured over 300 others, with more than 1,000 foreign companies affected.

Chinese authorities said that the drilling is a natural continuation of explorations that have taken place for a decade within the country's inherent territory. The authorities have urged Vietnam to immediately stop all provocations and properly handle the aftermath of the violence.

"The spat has already brought huge economic losses. If the provocation escalates, it will not only dampen the confidence of Chinese companies, but may backfire, bringing adverse effects to the Vietnamese economy," Li said.

By May 22, Vietnam had seen revenues of 899 million U.S. dollars for 2.061 million tonnes of rice sold this year to the world market, with over 40 percent sold to China. But its rice exports for May are expected to dip 10.2 percent in volume and 7.3 percent in value year on year, according to a recent report by Vietnam's Ministry of Agriculture and Rural Development.

China is Vietnam's largest export market for rice, coal and crude rubber and remains the major source of imports for Vietnam's demand for textiles, steel, oil products, electronics and other high value-added products.

Vietnam's tourism sector has also taken a hit. Data from the Vietnam National Administration of Tourism (VNAT) showed that the number of Chinese visitors to Vietnam increased 34 percent year on year in the first half of 2014, but the number has declined sharply since May.

About 14 out of 19 direct flights from Chinese localities to Vietnam's tourist attractions have been canceled since the violence, and Vietnam is negotiating with the Chinese side to resume normal flights, according to the VNAT.

Meanwhile, it is reported that the riot has left about 60,000 people jobless in south Vietnam, with 40,000 of them asking for government unemployment subsidies and 20,000 receiving unemployment compensation.


Trade between China and Vietnam has grown rapidly. By 2013, China had been Vietnam's largest trade partner for nine years in a row. Last year, bilateral trade between the two countries totaled 65.48 billion U.S. dollars, up 30 percent year on year, Chinese customs data showed.

"It is fair to say that the two countries have close trade and investment ties and China is a major market for Vietnam," said Wang Xiaopeng, a researcher with the Chinese Academy of Social Sciences.

"It's impossible for Vietnam to maintain normal trade with China if Vietnam continues its provocative activities toward China," Wang said.

Wang warned that provocations might eat into Vietnam's hard-won success from 28 years of reform and opening up, as the current tensions over the South China Sea have already damaged Vietnam's image as a friendly investment destination.

Nguyen Duc Thanh, director of Vietnam Center for Economic and Policy Research under Vietnam National University, forecast that Vietnam's economic growth in 2014 is expected to range from 4.15 to 4.88 percent, lower than the 5.42-percent rate in 2013 and the 5.8-percent growth target for 2014.

Meanwhile, regional partnership may also be impacted, said Wu Shicun, head of the National Institute for South China Sea Studies.

As China strives to boost regional cooperation with the ASEAN through proposals such as the Maritime Silk Road, Pan-Beibu Gulf economic cooperation and the Asian Infrastructure Investment Bank, Vietnam's move to stir disputes may push China to review its strategies in Southeast Asia and drag out the progress of the Regional Comprehensive Economic Partnership (RCEP) talks due to reach an agreement in 2015 as well as the establishment of a Free Trade Agreement of the Asia Pacific, Wu said.

Mutual respect and win-win cooperation are not only beneficial for the two countries but also for the whole Asian region, Wu added.

Editor: Fu Peng
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