Vietnam Economy in the Middle of the US – China Trade War Nguyen Xuan Thanh Fulbright University Vietnam HCMC, 17 October 2019
Vietnam’s Growth Performance, 2008 -2018 13% 12% GDP, FDI Sector 11% 10% 9% GDP, Manufacturing and Services 8% 7% GDP, Total 6% 5% 4% 3% 2% 1% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source : GSO
• The story behind Vietnam’s recent strong growth performance – FDI-led manufacturing – Growth in household consumption driven by the middle class – Macroeconomic stability • Challenges ahead – Navigating the US-China trade war – Taking advantage of continued FDI inflows and shifts in global value chains by boosting investment in infrastructure and improving the business environment
The US – China Trade War • US imports less from China, • US trade deficits widened with all major but more from the world. trading partners, including China. Change in US Imports from Change in US Trade Balance from Aug 17-Jul 18 to Aug 18-Jul 19 Aug 17-Jul 18 to Aug 18-Jul 19 10 3.0 Singapore 110 6.2 Canada Others 4.2 0 5.3 India 6.2 South Korea 90 Taiwan 7.0 0 Mexico -24.7 Japan 7.4 12.1 Vietnam 0 70 0 Mexico 27.9 50 -15.6 EU28 -$71 bn +$92 bn 0 30 -11.1 Vietnam 0 EU28 38.0 China -7.9 10 0 Canada -7.7 Singapore China -4.1 0 0 -21.7 Taiwan -2.9 -2.4 Japan -1.0 South Korea 0 Source: USITC 0
Vietnam’s Trade with the US and China Exports Imports 30% 27.7% 38.5% 40% 2018 2019.8M 2018 2019.8M 20% 16.8% 30% 14.3% 13.3% Change 8.1% 10% 17.7% 20% 13.3% 12.5% 9.0% 8.0% 0% 10% -2.0% -10% 0% Total Exports To US To China Total Imports From US From China Major Export Products to the US Major Import Products from China 100% 88.4% 80% 80% 74.3% 2018 2019.8M 2018 2019.8M Growth (%) 60.1% 60% 60% 46.3% 46.0% 40.5% 38.0% 40% 33.0% 40% 27.3% 27.8% 28.0% 19.3% 24.6% 22.4% 20% 16.3% 20% 6.7% 0% -1.2% 0% -20% -1.6% -16.6% -5.2% -20% Electronics Furniture Machinery Steel Smart products phones Source: VN General Department of Customs
US Trade Deficit with Vietnam 2019f 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0 -10 US$ Billion -20 -30 -34.8 Data from Vietnam General -44.7 -40 Customs Department -41.4 -50 -50.7 Data from US International Trade Commission -60 Source: VN Customs & USITC
Despite increased interests from foreign direct investors, newly registered FDI in 2019 is down year-on-year. Newly Registered FDI 2018 2019.8M US$ Billion US$ Billion Total 17,976 9,128 China 1,217 1,876 South Korea 3,658 1,721 Japan 6,592 1,185 Hong Kong 1,129 1,110 Singapore 1,424 1,034 Note: Newly Registered FDIs do not include M&As & changes in existing FDI companies. Source: Ministry of Planning and Investment
Slow execution and low efficiency in infrastructure investment Infrastructure investment has been declining as a percentage of GDP 18 14% Boosting infrastructure US$ BIllion Public investment in infrastructure % GDP 16 Private investment in infrastructure investment and efficiency 12% Infrastructure investment (% GDP) 14 should be the 10% 12 government’s top priority 8% 10 to take advantage of 8 6% continued economic 6 4% openness, develop supply 4 chain networks, and 2% 2 upgrade the economy. 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source : GSO
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