From Overseas Press

Will stronger yuan help Vietnam?

(Viet Nam News)
Updated: 2010-06-28 13:55

China's decision to allow the yuan to appreciate by 0.43 per cent will have an impact on its trade with the rest of the world, especially its neighbours like Vietnam.

According to Truong Dinh Tuyen, Vietnam's former trade minister and currently member of the National Consultancy Council for Financial and Monetary Policies, the stronger yuan will also boost China's investment in other countries, including Vietnam. In the event, he warns, "to say 'no' to [accepting] outdated, environmentally-unsafe technologies is of great importance."

The stronger currency will also make Chinese goods less competitive and Vietnamese buyers can choose products from other countries, he says.

The flip side is that Vietnamese goods will become cheaper for China and "Vietnamese businesses should take this opportunity to promote exports," he says.

Dr Tran Dinh Thien, director of the Vietnam Institute of Economics, said the stronger yuan might help Vietnam narrow its trade deficit with China.

But the nature of goods exported to China, raw materials and minerals, must be changed in the long term.

Local garment and textile enterprises will be among the worst affected since they import billions of US dollars worth raw materials from China.

Le Quoc An, chairman of the Vietnam Textile and Apparel Association (VITAS), said Vietnam's imports of textile and garment feedstock amounted to US$7 billion a year, half of them from China.

An advised VITAS members to switch to other sources of supply like Thailand and India and even domestic sources.

He also urged Vietnamese exporters to take this opportunity to boost their competitiveness in global markets because a stronger yuan would make Chinese products less competitive.

The director of the ministry of industry and trade's Asia-Pacific market department, Dao Tran Nhan, said the department had been studying what impact a stronger yuan would have on Vietnam.

According to the statistics department, in the first five months of 2010, Vietnam's imports from China amounted to $3.7 billion, a year-on-year increase of 32 per cent, and its exports, $2.3 billion, up 43.7 per cent.

Vietnam's major exports to China include coal, rubber, crude oil and wood products and imports include machine tools and feedstock for the textile and garment industry.