5 - The Political Economy Dimensions of Vietnam-China Economic Relations

Summary

Introduction

By the time Vietnam and China normalized their relations in 1991, official bilateral economic exchanges were virtually non-existent.1 After normalization, however, favourable domestic and international conditions encouraged bilateral economic exchanges to expand rapidly. In China, Deng Xiaoping's famous southern tour took place just a few months after bilateral normalization. Deng's tour reasserted China's economic reform and openness against the conservative backlash following the Tiananmen demonstrations, and encouraged China's further expansion of foreign economic exchanges. Meanwhile, in Vietnam, the country's increasing economic stability was also favourable for its promotion of international integration. Vietnam's weak production base, in particular, caused a scarcity of even the most basic consumer goods and led to high demand for imports from China (Beresford and Phong 2000, p. 132). Internationally, the demise of the Council for Mutual Economic Assistance (CMEA) necessitated Vietnam's expansion of economic exchanges with any country that could help compensate for its loss of trade with former CMEA member economies. As a result, China, along with other East Asian economies such as Japan and Taiwan, conveniently emerged as an important trade partner for Vietnam due to the geographical proximity between the two countries. At the same time, bilateral economic ties also benefited from the end of the Cold War which accelerated the process of globalization and facilitated the economic liberalization and international integration of most countries, including both Vietnam and China.

Deepened economic ties have therefore become an outstanding feature of Vietnam–China relations since their normalization. The deepening of economic relations has brought significant benefits to both countries. In 2013, for example, China was the largest source of imports for Vietnam, providing the country with 28 per cent of its total (General Department of Customs 2013c). Vietnam's exports to China have also increased steadily over the recent years, almost tripling from US$4.9 billion in 2009 to US$13.2 billion in 2013 (General Department of Customs 2013b). Vietnam is accordingly becoming an increasingly important export market for Chinese manufacturers, especially those from southern provinces. Meanwhile, imports of raw materials such as crude oil and coals from Vietnam also help fuel China's economic growth. Other aspects of bilateral economic ties, such as aid, project contracting, and investment, have also enjoyed different levels of development.