VietNamNet Bridge – Economists have described three possible scenarios for Vietnam-China economic relations in the context of the East Sea situation, with the most likely scenario one of “struggling and cooperating at the same time”.

The Vietnam’s 2007-2013import (in green color) and export (red color) graph

The Vietnam-China economic relation research team headed by Nguyen Quoc Truong and Ngo Hai Long devised the scenarios within the framework of a survey conducted by Vietnam Report, a Vietnamese credit rating firm, in cooperation with renowned economists.

In the worst scenario, China would impose economic sanctions amid tensions in the East Sea, or stop Vietnam-China bilateral economic relations and impose an economic embargo against Vietnam in case tensions escalate.

In an average scenario, economic relations between Vietnam and China would see major changes. The “cooperating and struggling at the same time” policy would be replaced with “struggling and cooperating at the same time”.  

In the best scenario, the tensions in the East Sea would not affect the two countries’ economic relations.

Of the three scenarios, the economists, noting the Chinese administration’s provocative activities and aggressive attitude recently, even despite international opinion, believe that China does not intend to give peace back to the East Sea.

This means that Vietnam needs to prepare itself well for new circumstances, developing a national economy in unfavorable conditions.

The economists also do not think China would impose economic sanctions on Vietnam. It is not likely that China is able to apply strong measures to harm the Vietnam’s economy, because it well understands that the sanctions would harm China itself both economically and politically.

In fact, even if China really wants to impose sanctions on Vietnam, the sanctions would not have serious long term impacts on the Vietnam’s economy, which has high openness, because China does not have effective tools to do this.

Therefore, the authors of the report think that the most likely scenario is the second one, which means Vietnam and China would both struggle and cooperate for economic development at the same time.

Vietnam may face some difficulties in developing its economy as China is Vietnam’s biggest trade partner, while Chinese contractors are undertaking many important projects in Vietnam.

Vietnamese producers, who have been depending heavily on Chinese input materials (Vietnam imports 70 percent of materials needed for the garment industry and imports 70 percent of rice varieties), would face big difficulties if the supply sources are interrupted.

According to Nguyen Bich Lam, general director of the General Statistics Office (GSO), warned that if Vietnamese cannot find other trade partners, the GDP may see a 10 percentage point decrease if China severs economic ties with Vietnam.

Nevertheless, even if China imposes strong economic sanctions, analysts say this would only cause short term damages, while only some certain areas of the economy would suffer.

Vietnam’s economy has been performing well over the last two months since the day China began deploying an oil rig in the Vietnamese territorial waters in the East Sea.

GSO, citing statistics, has said that it can see indicators showing that the national economy has begun to take off after bottoming out.

TBKTSG