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Prospects and solutions to promote economic and trade relations between Vietnam and China - 2

China accounts for nearly 70% of the population in this region, its GDP ranks third, after the US and Japan, and its exports rank fourth after the US, Japan, and Canada. On the other hand, 70% of China's foreign trade is conducted with Asia-Pacific countries. Most of China's important trading partners are Asia-Pacific countries. Of the nearly 100 billion USD of FDI poured into China in recent times, more than 60% comes from Asia-Pacific countries. Second , the outstanding advantage of the Chinese market with Asia-Pacific trading partners is the ability to complement each other in terms of resources, human resources, capital and technology for mutual development. In cooperation, all sides can promote their comparative advantages for a relatively long time, so they can become each other's strategic trading partners. Third , along with the promotion of attracting foreign capital and the rapid development of "three-source capital" enterprises, the export proportion of "three-source capital" enterprises in China's total export turnover has accounted for nearly half. This shows that China's economy has been deeply involved in the international division of labor. The difference in the level of economic development in Asian countries

-The Pacific has facilitated the process of economic structural upgrading in China, and the interdependence between China and Asia-Pacific countries is increasingly close. It reflects an objective reality that China needs Asia-Pacific countries and Asia-Pacific countries also need China.

5. Comparative advantages in cross-border goods exchange between Vietnam and China

Cross-border trade between Vietnam and China increased from only 2% of Vietnam's total trade in 1990 to 4%, and from 1991 to 1999 it was about 6-7%. So cross-border trade also accounts for a fairly large proportion of Vietnam's total trade. Therefore, to develop trade and economic relations between Vietnam and China, we need to consider the comparative advantages that can be exploited in trade relations.

It must be affirmed that the potential for goods exchange across the Vietnam - China border that we must calculate and exploit is still very large.

Vietnam can absolutely increase its exports to China. For example, the first Mong Cai International Trade Fair (January 16-20, 1997) showed more strong Vietnamese products (compared to Chinese products) such as products of Xuan Hoa Company, Ha Long Canned Food Factory, Van Ha Handicraft Company (Dong Anh - Hanoi), Truong Son Handicraft Company (Tu Son - Bac Ninh)... Here, we will only focus on machinery and equipment, which currently only account for 1% of Vietnam's total exports. The ability to expand the export of machinery and equipment to China is demonstrated in that:

- According to the report of the General Corporation of Engines and Agricultural Machinery, our mechanical products have begun to be exported to Indonesia, Taiwan, Hong Kong... For example: exporting 200 sets of rice milling machines to Indonesia and Burma,

40,000 sets of rice milling rollers for Yanma, 50 models of two-wheeled hand-operated machines with capacity

6, 10, 5, 13 and 15 horsepower to ASEAN.

- Foreign-invested enterprises are increasingly playing a role in export activities. It is entirely possible to hope that this sector will conquer the Chinese market.

- In fact, China has a great demand for importing machinery and equipment from outside. For example, out of the 185 billion USD imported in 1994, the proportion of machinery and equipment accounted for 16%, and transportation equipment accounted for 6%.

- The 1,150 km long Vietnam-China border runs through 156 communes in 31 districts of 6 northern provinces of Vietnam, including locations with advantageous economic geography in trade relations with China. Lao Cai is a typical example. The Southwest region of China is very large, with great export potential, but it is far from China's seaports. If imported through Lao Cai border gate, the sea route is only 600 km, shortening the traffic length by 4-5 times. Thus, Lao Cai can become a bridgehead for the Southwest region to reach the sea, and therefore, an ideal hub for re-exporting goods of countries through Vietnam and China. (Of course, this advantage has been overshadowed by the Vietnam-China Transit Agreement signed on April 9, 1994 in Hanoi: allowing goods of the People's Republic of China brought back from a third country to pass through Vietnamese territory, through the Huu Nghi, Dong Dang, Lao Cai, and Mong Cai border gates).

- Currently, the Chinese side's forces participating in relations with Vietnam are still quite limited. They are mainly provincial and district-level companies of southern provinces such as Guangxi, Yunnan, Hainan... and some provinces such as Guangxi, Sichuan... The number of companies managed by the Chinese Ministry of Economy and Trade participating is very small.

On the other hand, the provinces bordering Vietnam, although having large areas (nearly equal to Vietnam's area) and large populations (2.5 times larger than Vietnam's population), are also economically underdeveloped regions. Industrial production is only abundant in the Pacific coast of Guangdong province, however, both quality and quantity are inferior to central industry.

Thus, if Vietnam expands and deepens its relations with mainland China, it will further promote its advantages and further exploit China's advantages.

6. Agreements and treaties

Since the normalization of Vietnam-China political relations (November 1991), especially after the two countries signed a number of agreements on border relations, trade and technical cooperation between the two countries such as: Trade Agreement between the two countries, Temporary Agreement on Settlement of Border Area Work, Vietnam-China Economic Cooperation Agreement, Agreement on Transport between the two countries (road, air, maritime, railway), Investment Encouragement and Guarantee Agreement, Vietnam-China Economic and Technical Cooperation Agreement, Land Border Agreement... the economic cooperation and trade exchange relationship between Vietnam and China has been opened on the basis of legal scale and improved quality.

Below are some agreements related to economic and trade relations:

1. Trade agreement

Signed on December 7, 1991 in Beijing. The agreement stipulates that the two sides trade according to international practices, only applying most-favored-nation in the two areas of customs duties and customs procedures, trade is carried out on the basis of contracts between companies and economic entities with the right to conduct import-export business (on the Vietnamese side: the Ministry of Commerce issues import-export business licenses. On the Chinese side: the Ministry of Economy and Foreign Trade of China notifies Vietnam and regularly reminds Vietnam. Only companies with the Ministry's right to conduct import-export business are qualified to sign foreign import-export contracts), contracts are signed according to international practices, on an international basis, payment is made in freely convertible currency through banks, in addition to trading using money, other forms of trading can be used (for example, bartering goods...) but payment must still be made through banks.

Trade contact activities (exhibitions, advertising...) conducted by one side on the other side's land must be carried out by specialized trade promotion agencies.

In addition to import-export trade, there is also folk trade with the traditional exchange of goods between permanent residents in the border areas on both sides, not of a business nature, buying and selling for profit.

2. Economic cooperation agreement

This Agreement signed on February 14, 1992 stipulates the most general principles for economic cooperation between the two sides on the basis of equality, mutual benefit, respect for the laws of the two countries, foreign investment laws of each side, and stipulates forms of cooperation such as joint ventures, investments, construction contracts, etc.

3. Interim agreement to resolve border issues

Signed on December 7, 1991 in Beijing. The agreement stipulates border gates for goods to pass through, of the 21 pairs of border gates, there are only 7 national border gates. Of the 7 national border gates, there are only 4 international border gates: (Huu Nghi - Huu Nghi Quan, Lao Cai - Ha Khau, Dong Dang - Bang Tuong, Mong Cai - Dong Hung) in which Dong Dang - Bang Tuong is a railway border gate. Import and export goods of third countries can only go through these 4 border gates, not through other border gates.

4. Maritime Agreement

Signed on March 8, 1992 in Beijing. The maritime agreement stipulates the principles of bilateral cooperation in the maritime field, including: the two sides allow ships of the other country to enter and do business at their ports like fishing vessels of other countries, in accordance with their current maritime regulations.

5. Agreement on transit of goods

Just initialed 12/1993, not officially signed. In this agreement, both sides agreed to allow the other side's goods to transit through their land.

In addition, there are agreements such as:

+ Agreement on banking payments signed May 1993.

+ Aviation Agreement 5/3/1992.

+ Agreement on coordination in quality inspection of imported and exported goods signed

late 1992.

+ Minutes of the meeting between the two trade expert delegations (July 1993). This minute confirmed that there was a chaotic trade situation at the border that neither side could manage and affirmed the need to promote trade between the two countries in accordance with the provisions of the trade agreement signed in November 1991.

+ Minutes of the meeting between the two delegations of experts on the implementation of the Interim Agreement on the settlement of border affairs (January 1994). Regarding trade, this minute confirms that trade between the two sides must be carried out in accordance with the provisions of the trade agreement signed in November 1991.

+ Agreement on assistance and cooperation and agreement on cooperation against trafficking

smuggling between customs of two countries (11/1993).

II. THE ROLE OF VIETNAM - CHINA ECONOMIC - TRADE RELATIONS

1. For China

From the near context, China can use the Vietnamese market to solve part of its economic and technical trade difficulties including:

- Consumption of low and medium quality technical and goods to Vietnam, a large market of nearly 80 million people and located nearby. These goods are mainly Chinese goods that are in stock (construction materials, common iron and steel, chemicals, traditional machinery and equipment, mainly small-sized power machines, agricultural machinery, spare parts... and consumer goods).

- After restoring trade with Vietnam, China can develop the vast Southwest region including the provinces of Sichuan, Guizhou, Tibet, Yunnan, and Guangxi.

First, let's look at the situation in these provinces:

Yunnan and Guangxi are remote and far from the center (Yunnan is not adjacent to the sea), the level of development of production, science and technology and the penetration of economic reform are relatively low. Due to inconvenient transportation, the Chinese central government has difficulty in actively sponsoring the development of these two regions.

* Yunnan and Guangxi provinces are facing the following economic difficulties:

+ Following the self-reliance policy, these two provinces have comprehensively developed industrial production sectors. However, their technical level is still low, so their industrial products are not competitive enough in the world market. They have difficulty in consuming these products, in recovering capital and in investing in new techniques. These relatively low-quality products are in surplus, causing great obstacles for the economy. Among them, some products are in surplus to a serious extent, such as chemicals.

+ Food and energy are generally in short supply.

+ Lack of some necessary products: rubber for Guangxi (Yunnan can still grow rubber), seafood, food, and livestock meat for Guangxi.

But in general, for these two provinces, the main difficulty is the market for consuming manufactured goods, heavy industrial goods and light industrial goods.

* Hainan is a coastal region, with a highly developed foreign economic and investment environment. However, it lacks raw materials and markets for some traditional industrial products of average quality and light industrial products.

Therefore, since the re-establishment of Vietnam-China relations, China has opened trade routes for these provinces to go to the East Sea and Southeast Asian countries. The two provinces that share a border with Vietnam, Yunnan and Guangxi, have both improved their economies after opening up to Vietnam. This is especially evident in Guangxi province, where 80% of the turnover with Vietnam is border trade. Originally a mountainous province on China's southern border, its economy was underdeveloped, lowly and backward compared to other inland provinces. Over the past ten years, its economy has flourished, many economic potentials have been awakened, and it is no longer a subject of state subsidies. Guangxi's border gates are filled with goods to be exported to Vietnam, not only from the province itself, but also from other provinces, so they are also transit stations. The township enterprises of Guangxi and some inland provinces have become prosperous thanks to the new market of Vietnam.

- Using Vietnam as a sea route for the provinces of South and Southwest China, mainly the Yunnan and Southwest China regions far from the sea (as mentioned above), and the Thap Van Dai Son range causing great obstacles for traffic routes. The French, when they first occupied Vietnam, immediately established the Yunnan - Lao Cai - Hai Phong railway. The need to transport transit goods from Yunnan to Vietnam via China is estimated to be up to several hundred million tons/year, bringing high economic efficiency to Yunnan, not only direct efficiency but also long-term development efficiency thanks to connecting to the world via a convenient route (for many years, the Yunnan region had to go through Myanmar to reach the Indian Ocean, which was not as convenient as the Lao Cai - Hai Phong route).

- Obtaining raw materials needed for local production in China (all kinds of ores, coal, rubber, vegetable oil, jute...). In varying quantities, depending on the requirements of the provinces and raw materials used for central industry (oil, coal, electricity, rare earth...). In addition, Vietnam can also be used to provide food, seafood, meat and live animals to the Southwest region (mainly Yunnan) to help solve the difficulties in supply and transportation (Yunnan province revealed its need to buy up to 4 million tons of rice from Vietnam each year).

2. For Vietnam

- Developing economic and trade relations with China is not only in line with the foreign policy of "being friends with all countries", but also serves the country's economic development strategy; Vietnam focuses on relations with neighboring countries to create a peaceful and stable environment, contributing to maintaining national security and creating favorable conditions for the renovation process to proceed smoothly.

- Vietnam re-established trade relations with China in the context of severe socio-economic difficulties. Relations with traditional trading partners, the Soviet Union and Eastern European countries were almost interrupted. Goods were in serious shortage. Opening trade with the northern neighbor was like

The blocked flow was cleared, and the high side was the abundant goods of China, which had undergone 10 reforms, rushing down to the low side, where Vietnam was lacking goods. Trade with China quickly showed positive effects, especially in the northern border provinces of Vietnam. The mountainous border areas, which used to be the bottom of Vietnam in terms of the risk of falling further and further behind economically compared to many countries and regions in the world, are now less hungry and desolate. Many places have known how to discover their potential strength, seize the opportunity, and proactively seek advantages to develop through trade with China. Many border provinces that previously had to receive subsidies from the central budget, but after only a few years of opening up to China, have become prosperous, not only contributing to the central budget, but also having more capital to invest in social infrastructure; roads and streets in border towns are larger, more beautiful and more spacious than before. Towns such as Mong Cai, Dong Dang, Lang Son were almost completely destroyed during the border war, but only a few years later they were rebuilt, becoming bustling trading centers, important international transit points between Vietnam and China. In terms of life, the majority of Vietnamese people feel comfortable and relieved because they can buy a variety of new, affordable consumer goods. A significant number of people in the border provinces have escaped poverty, thanks to more jobs and increased income from production, trade, and transportation of goods across the border. Thanks to trade with China, Vietnam has significantly increased import and export turnover, especially coastal provinces, have been able to sell goods that were previously not sold to anyone, and have been able to buy goods that meet production and consumption needs. In the competition with Chinese goods for survival, many Vietnamese products have improved their quality, become more agile, and more knowledgeable in business management thanks to communication and struggle with business partners from a neighboring country that has been trained in the market mechanism 10 years before us.

- For Central and Provincial:

+ Increase budget revenue for the Central and local governments. Through the exchange of goods, units and enterprises have contributed a significant part to the Central and local budgets through tax payments. From there, the Central and local governments have the conditions to invest in the construction of infrastructure, transportation, wharves, yards, electricity systems, information, public service works in localities, remote areas, and border areas, creating favorable conditions to increase the pace of trade exchange between the two sides.

+ Supplementing the source of raw materials that cannot be produced domestically or cannot be produced sufficiently, creating necessary competition between domestic and foreign goods, thereby stimulating domestic production to meet market demand and improving quality, increasing competitiveness in the world market. Up to now, the bicycle, fan, soap, and sanitary ware manufacturing industries of Vietnam have regained their reputation.

+ Create a clear change in creating export sources from collection to investment to create stable export sources with economic efficiency. Along with the rapid increase in export turnover and export structure, many localities and industries have paid attention to investment sources to create sources of goods.

solid as specialized fruit growing areas, aquaculture areas

products, shrimp, eel, soft-shell turtle, snake... medicinal plant growing area and essential oil production...

+ Exporting a large volume of goods that we are having difficulty with in the market and that you have demand for, and at the same time not being too strict in quality standards. It can be said that in the period 1991-1994, through border trade, we exported a quantity of raw materials with quality that is difficult to compete in the international market such as: coal, rubber, vegetable oils, tropical fruits, medicinal herbs...

+ Open up border tourism, thereby expanding domestic tourism routes, contributing to attracting tourists to Vietnam, enhancing cultural exchange between the two countries.

- Vietnam can continue to increase its use of Chinese technology:

+ China's manufacturing level in some industries has developed. Central Industry has produced many products with quality equivalent to international standards.

+ In China's main export items in general, there is machinery and equipment with a proportion of 3%.

Currently, many Vietnamese companies are relying on Chinese machinery and equipment. Thai Binh Mechanical Company is producing 2-wheel tractors with a capacity of 8-12 horsepower, and will import engines and gearboxes from Guangdong, Guangxi, and Hubei provinces, with a quantity of 1,000 machines per year. Vietnam Engine and Agricultural Machinery Corporation is testing the production of engines and agricultural machinery. Vietnam is testing the production of Dong Phong brand engines (made in China according to the Japanese Kybota engine model) with 4 cylinders, 20 horsepower, with a quantity of thousands of units per year. Dong Thap Mechanical Factory is testing the production of small-sized combine harvesters, which also need to import engines with a capacity of about 20-25 horsepower from China. Vietnam's sugar cane processing industry will still have to import some specific, highly precise Chinese know-how, such as continuous and intermittent centrifugal systems, boiler systems, and generators, for many years to come. Future vertical kiln cement plants will not need to import all equipment from China, but some equipment such as crushers, kilns, electrostatic dust collectors, etc. will still have to be imported from China to repair and replace existing plants. Specialized spare parts for the construction, medical, and other industries will still have to be imported from China.

Chapter 2

CURRENT STATE OF ECONOMIC AND TRADE RELATIONS

VIETNAM - CHINA


Economic and trade relations between the two countries have gradually been restored and developed since the end of the decade. Since the two countries officially normalized diplomatic relations in 1991, economic and trade relations have developed more strongly than ever before.

I. TRADE RELATIONS

1. Characteristics of Vietnam-China trade relations

a. Rapid development but the growth rate has decreased

From 1991 to present, official trade turnover between Vietnam and China has increased 50 times, from 32 million USD to more than 1.5 billion USD (1998).

Table 1: Official trade between Vietnam and China 1991 - 1998 (million USD)


Year

Official trade

Growth Rate (%)

1991

32.23

340.0

1992

179.07

454.4

1993

398.64

122.6

1994

532.82

34.1

1995

1052.19

97.4

1996

1150.63

9.3

1997

1435.64

24.6

1998

1560.00

8.7

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Prospects and solutions to promote economic and trade relations between Vietnam and China - 2

Looking at the statistical table, we see that the absolute value increased sharply, but the growth rate was not even in all years. In the early 90s, the turnover between the two countries grew strongly, although it slowed down in later years, but in general, all years increased at a high rate. The reason for this situation is because:

Firstly , the demand for goods of the two countries is the basis for the development of bilateral trade. In the early 90s, Vietnam's economy still faced many difficulties, domestically produced consumer goods could not fully meet the needs of the people. In that context, Chinese consumer goods met the needs of Vietnam. On the Chinese side, after more than a decade of reform and opening up, entering the 90s, the economy developed strongly with the total value of goods increasing, and people's lives improving day by day. To serve the economic development, China still has many raw materials and agricultural products. These items are

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