Last year Viet Nam spent $5.56 billion to import feedstock and accessories from China for the garment and textile industry, and $5.7 billion to buy phones and electronic components. — Photo thoibaokinhdoanh

HCM CITY (Biz Hub) — Vietnamese firms trading with China should have a rethink to reduce the ballooning trade deficit and the massive dependence on the neighbouring country, entrepreneurs told a forum held in HCM City last week.

Thai Vu Hoe, director of the southern branch of the Cultural Centre of Vietnamese Businesses, said Vietnamese firms should say "no" to substandard Chinese products and this is the right time for them because of the domestic support at the moment for such a course of action.

He pointed out that many firms depending on exports of fruits, rubber, and rice to China are suffering from the recent East Sea tensions since orders have plummeted.

Ho Quang Minh, chairman of the Business Network International Viet Nam Company, said Vietnamese companies should manage to find other sources for feedstock and inputs to replace imports from China.

They and many others expressed concern about the country's massive trade deficit with China.

According to the General Statistics Office, in 2013 Viet Nam achieved a trade surplus with 16 markets - of which the surplus with the US was the highest at US$18.64 billion - but ran up a deficit of $23.7 billion with China.

A similar scenario has been developing this year. According to the General Department of Customs, in the first quarter this year Viet Nam had a surplus of $4.4 billion with the US and a deficit of $4.5 billion with China.

Last year Viet Nam spent $5.56 billion to import feedstock and accessories from China for the garment and textile industry, and $5.7 billion to buy phones and electronic components.

The country also imported Chinese equipment and technology worth $36.8 billion, accounting for 28 per cent of total imports.

Dr Le Dang Doanh, former chief of the Central Institute for Economics Management, said except rice most Vietnamese products are exported to China without contracts, putting the country at a great disadvantage.

With Viet Nam preparing to sign the Trans-Pacific Partnership Agreement (TPP), if Vietnamese garment and textile firms continue to use Chinese raw materials they would forfeit the benefits from the deal since China would not be part of the TPP, he said.

Vietnamese enterprises should therefore soon find other sources to replace China, he warned.

Dr Hoang Tho Xuan of the Trade Research Institute concurred saying that in the long term Viet Nam should become sell-sufficient in feedstock as well as develop supporting industries.

Pham Sy Thanh, director of the Viet Nam Centre for Economics and Policy Research's China Economic Research Programme, told Sai Gon Economic Times: "Viet Nam has not benefited from trade with China unlike the Philippines, Thailand and Singapore, and so it is necessary to improve the quality of trade with China.

"We now export unprocessed or semi-processed products with low value addition to China, but import high value-added products.

"This is because our technological standards are still low and the supporting industries have not yet developed sufficiently.

"We export $30 million worth of agro-products to China but import $300 million of similar products from China. This shows that our market management and trade policies have problems."

To improve the quality of trade with China and reduce reliance on that country, it is necessary to have temporary technical barriers and improve the country's administrative ability, develop the supporting industries, and look for new sources of goods to replace China, he added.

Pham Chi Lan, former chairman of the Viet Nam Chamber of Commerce and Industry, said: "We need to adjust our industrialisation strategies. Initially we had focused too much on heavy industry, and after Doi moi (renovation) we paid more attention to light industry, but only consumer goods.

"Consequently, the supporting industries have been forgotten and now we have to import intermediate products.

"Viet Nam is negotiating free trade agreements and the TPP. This is an opportunity for us to find new suppliers or invite new investors to participate in the development of the domestic supporting industries," Lan said. — VNS