New Economy Forum

Vietnam’s Premier Seeks ‘New Ways’ to

Survive U.S.-China Trade War
By Nguyen Dieu Tu Uyen, Haslinda Amin, and John Boudreau
September 11, 2018 4:00 AM +07

Prime Minister Nguyen Xuan Phuc speaks in interview in Hanoi

Vietnam has sought closer economic, military ties with U.S.

Vietnam Premier Ready To Overcome Obstacles of U.S.-China

Trade War

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VIETNAM
China Straszheim Says
WILL SURELY IMPACT OUR COUNTRY.
0:42 / 2:46

Vietnam’s Prime Minister says his country can withstand the effects of any trade war between the U.S. and
China.

Vietnam’s government will use a combination of trade deals and domestic reforms to
survive the fallout from a U.S.-China trade war, according to Prime Minister Nguyen
Xuan Phuc.

“This trade war between the U.S. and China will surely affect Vietnam,” the premier
said in an interview with Bloomberg Television’s Haslinda Amin at the Government
Office in Hanoi on Monday, ahead of the World Economic Forum on Asean, which
Vietnam is hosting. “We are seeking new ways to grow,” he added. “We want to
maintain good relations with both the U.S. and China.”

Nguyen Xuan Phuc

Vietnam’s economy is particularly sensitive to disruptions in global supply chains as

trade amounts to about twice its gross domestic product -- more than any country in
Asia apart from Singapore. About a quarter of Vietnam’s total trade is with China,
which is facing potential tariffs on all of its exports to the U.S. in an escalating trade war
with President Donald Trump.

Phuc said it’s important for Vietnam to maintain macroeconomic stability, export
growth and living standards for the country’s 96 million people. He repeatedly said
Vietnam was “resilient” in the face of global challenges and would seek more trade
agreements beyond the 12 it has already completed.

“We will have to rely on our internal strength and get our house in order so we can
overcome any obstacles and maintain momentum and growth,” Phuc said.
Exports Giant
Sales abroad as a percentage of gross domestic product largest in Vietnam

Source: World Bank

Note: Data as of 2017

In written comments distributed as an addendum to the interview, Phuc said Vietnam

would strive to make its economy more competitive and “closely watch the
development of international markets to manage our currency with active and flexible
monetary policies in combination with strict fiscal policies.” At the Asean meeting,
Vietnam “expects to discuss new business deals with companies and regional
economies,” according to Phuc.

Vietnam’s GDP expanded 7.1 percent in the first six months of the year, the second-
fastest among major Asian economies behind India. Still, the government has said
growth may slow in the second half and it’s seeking to keep inflation under control,
with steps including subsidizing fuel and freezing electricity prices .

Moody’s Investors Service upgraded Vietnam’s credit score last month, citing its
strong growth potential buoyed by healthier banks, stable debt levels and more
efficient use of capital. The Vietnamese dong is among the most stable currencies in
Asia this year, compared to large declines in others like the Indian rupee and the
Indonesian rupiah.

Trump Risk

Vietnam emerged as a manufacturing and export powerhouse after introducing

market-oriented “doi moi” reforms in the 1980s, selling everything from shoes to
smartphones. Exports surged to a record $215 billion last year, with U.S. customers
accounting for about $42 billion of that -- more than double compared with five years
ago.

While Vietnam’s one-party political system provides government stability, it also has
been criticized for human-rights abuses and silencing dissent. This week it denied entry
to two human rights officials who were invited to participate in a World Economic
Forum event. The foreign ministry didn’t reply to a request for comment.

Vietnam also risks coming under attack for a trade surplus with the U.S. that reached
$39 billion last year, the sixth-largest after Japan, Canada, Germany, Mexico and China.
So far, Vietnam has managed to escape Trump’s ire.

“I told Trump I agree with him that we need to balance our trade, but what we shipped
to the U.S. is actually benefiting American buyers and the investment inflow from the
U.S. to Vietnam is also very positive,” Phuc said.

In Vietnam, Discontent Lurks Under Surface of Economic Success

Vietnam has sought stronger economic and military ties with the U.S. to counter
China’s growing power and aggressiveness over disputed territory. A Pew opinion poll
released last year found just 10 percent of Vietnamese view China favorably, compared
with 84 percent for the U.S. -- the biggest differential of the 36 nations surveyed.

In June, thousands of demonstrators from Hanoi to Ho Chi Minh City rallied against a
proposed law establishing special economic-zones over fears it would favor Chinese
investors, with some protesters reportedly throwing Molotov cocktails and setting
motorbikes on fire. Consideration of the law, which would grant 99-year leases in
economic zones, has now been delayed to the National Assembly’s spring session.

Vietnam rejects China’s claims to more than 80 percent of the disputed South China
Sea, and the two countries have clashed over oil exploration. In April, Vietnam Oil and
Gas Group, known as PetroVietnam, said the tensions were harming oil and gas
exploration, as well as efforts to attract foreign investment to offshore fields.
In the written remarks, Phuc said the government was working to ensure investors can
conduct normal business activities and “all economic activities in the waters under our
sovereignty, sovereign rights and jurisdiction is completely legal and protected by
law.”

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