Vietnam’s border trade with China slowly resumes, but the road to recovery is expected to be slow and painful
China is Vietnam’s largest trading partner, representing 20 per cent of the country’s imports and exports by value. It imports a third of Vietnam’s agricultural production. The outbreak of Corona Virus has put a dent in Vietnam’s exports, with local forwarders warning of further trade and manufacturing disruption. Vietnam’s key border crossings with China were closed, disrupting cross-border trucking, and all passenger flights to mainland China had been suspended. However, by the month end the Tân Thanh-Pò Chài Border Gate in the northern province of Lạng Sơn has been reopened, allowing cross-border trade between Vietnam and China to resume. Trucks transporting goods from Vietnam’s side to China are being disinfected and made to return on the same day. For the time being, only firms that can show they have contractual duties to deliver goods to China are given permission to move across the border. About 21 trucks carrying 315 tonnes of dragon fruit passed Thanh Thủy Border Gate in northern Hà Giang Province, the first convoy permitted to cross into China since the beginning of the year.
At the nearby Huu Nghi border, hundreds of trucks were seen preparing to transport goods to China after being stuck since February 5. The Vietnamese government has announced it will stick to this year’s economic growth target of 6.8 per cent and will take steps to ease the impact of the coronavirus outbreak. Fresh fruit and vegetables will have suffered the most damage because they cannot be preserved for long.
Vietnam’s January exports were down by 14.3 per cent, year on year, with the Ministry of Industry and Trade reportedly citing coronavirus as a key factor. While Vietnam is a major garment and footwear exporter, large quantities of raw materials for production are imported from China. In other industries, around 50 per cent of components required originate in China. The disruption to sourcing would impact domestic manufacturing, and therefore exports.
However, not all sectors have been negatively affected by Covid-19: the food industry, for instance, saw growth as people stocked up on food amid the Covid-19 epidemic. Many food processing enterprises are in fact requiring to increase production to meet the surge in demand both domestically and in export markets. According to Acecook JSC Company, one of the leading foodstuff companies in the country, the company has increased its production to around three billion packs of noodles a year. Lý Kim Chi, chairwoman of the city Food and Foodstuff Association, said most food processing companies have increased their production to meet the new orders. Vietnamese businesses have the advantage of having abundant raw materials, with 90 per cent of them being domestically sourced.
The General Statistics Office (GSO) forecasts if the coronavirus epidemic ends in the first quarter this year, Việt Nam’s industrial production value in the first quarter would increase by 2.68 per cent year-on-year, lower than growth rate of 9 per cent in the first quarter of 2019 and 10.45 per cent in the first quarter of 2018.
Production value of the manufacturing and processing sector, accounting for a large segment in the domestic industrial production, is estimated to increase only 2.38 per cent. If there had been no epidemic, the processing and manufacturing sector was expected to surge by 10.47 per cent.
In addition, other industrial products would also lose production value due to an extended epidemic including textiles, garment, leather and shoes that need imports of raw materials from China such as yarn, fabric, cotton, thread, needle, leather, and other equipment and accessories for the textile, leather and garment sectors.
To stabilise domestic production, GSO director Nguyễn Bích Lâm said the GSO had proposed the Government monitor trade activities, especially key export products and markets, and then solve problems of producers and traders of those products.