4 - Overview of Vietnam's Economic Development and Relations with China under Doi Moi

Summary

Introduction

After a few years of unstable growth following the adoption of Doi Moi in 1986, Vietnam's economic reform began to stabilize and gather speed since 1989. Starting from a low base, Vietnam's economy has been growing rather quickly, at an average annual growth rate of 6.8 per cent for the period from 1990 to 2014. Over the past twenty-five years, Vietnam's economy has also become more open with external exchanges now playing an essential role in the nation's economic well-being. In 2014, for example, Vietnam's export and import turnovers amounted to 81 and 80 per cent of its GDP, respectively (World Bank 2015b).

The economy's current level of openness is impressive given the fact that it was only in the early 1990s, when the Soviet bloc collapsed, that the country effectively began to open up itself to economic interactions with countries outside the socialist bloc. The same observation is also true for Vietnam's economic relations with China. For example, when the two countries normalized their relations in 1991, official bilateral trade turnover stood modestly at US$30 million (Vinh 2001, p. 73). In 2013, however, two-way trade turnover reached US$50.2 billion, accounting for 19 per cent of Vietnam's total trade turnover of the same year and confirming China's status as Vietnam's biggest trade partner (General Department of Customs 2014). At the same time, Chinese investment into Vietnam, although still modest, has also increased considerably, especially in the recent years. In 2013, for example, China was the fourth largest foreign investor in Vietnam, with US$2.3 billion registered in 110 projects (GSO 2014b, p. 111).

Vietnam's deepened economic ties with China are just one of the three key features of Vietnam's relations with China since normalization in 1991. Over the last two decades, despite recurrent waves of tensions due to the territorial disputes in the South China Sea, Vietnam's overall relations with China have improved considerably. Apart from deepened economic exchanges, bilateral relations have generally benefited from the partial removal of territorial disputes and the continual promotion of political relations between the two states and the two communist parties, with the most visible landmark being the establishment of a “comprehensive strategic cooperative partnership” between the two countries in 2008. All these three features constitute the big picture of Vietnam–China relations since their normalization in 1991.