China And Vietnam Announce New Trade Agreement

This month General Party Secretary Nguyen Phu Trong issued a joint statement with China’s President Xi that suggested trade between the nations would be scaled up. 

As well as saying that Vietnam and China are good friends, the statement also announced that they would promote strategic development between the two countries. 

This decision follows a shift in global supply chains as Vietnam becomes more attractive to international investors. 

Where once, China was head and shoulders above other nations in turns of manufacturing. Now, because of lockdowns and wage rises, Vietnam has shaped itself into a strong competitor. 

Companies want to diversify 

Over the past three years, China’s zero-Covid policy has put a strain on supply chains. To mitigate against this, businesses looked towards other nations with similarly low-manufacturing costs and a more relaxed approach to disease prevention. 

One industry that made this move was high-end technology, who relies heavily on China for microchip manufacturing and design. Now, huge corporations such as Intel and TSM have relocated their manufacturing operation to Vietnam. 

China’s corporations are no different. The nation already has the biggest trade surplus with Vietnam at $45.5 billion and it’s likely to increase as more Chinese businesses outsource to Vietnamese workers. 

China wants trade balance 

Both countries value the role of promoting e-commerce in each other’s nation. They also want to improve co-operation between their logistics businesses as part of the “Belt and Road” initiative. 

But Vietnam will also be increasing trade with China to secure the deal. These exports will largely be agricultural products such as dairy, fruit and other food items. 

If that wasn’t enough, the two nations have committed to infrastructure projects that would include a fishery at the Gulf of Tonkin, new border gates and research on meteorological conditions to help prevent droughts and floods. 

Will it last? 

Both nations benefit from their current relationship, with their bilateral trade revenue reaching $165.8 billion in 2021. And while there’s always a possibility of international conflict, both China and Vietnam recognise their role in this boost of intra-Asian trade, and are committed to sustaining it.

How this influences trade across the rest of the world remains to be seen, but as ever, our team will be assessing the impact and providing analysis once we have it.