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A neighboring country’s economic data sparked discussions on the Chinese Internet. According to the data released by the General Administration of Vietnam Customs, Vietnam’s exports ushered in a record surge in March, with a month-on-month increase of 48.2% to US$34.71 billion; it also brought Vietnam’s total exports in the first quarter to US$88.58 billion, a year-on-year increase of 12.9%.
At the same time, data from China’s Shenzhen Customs showed that in the first quarter, the city’s exports were 407.66 billion yuan, equivalent to 60.83 billion U.S. dollars, down 2.6% year-on-year. Among them, the export value in March was only about 120 billion yuan, down 14% year-on-year. .
This means that Vietnam’s total exports in the first quarter exceeded Shenzhen’s by as much as US$27.75 billion. Among them, the data gap in March is even larger, almost double that of Shenzhen, reaching 34.62 billion US dollars.
Although many analysts have pointed out that Vietnam is a country with a population of nearly 100 million, and Shenzhen is a coastal city with a permanent population of 17.5 million, Shenzhen, as China’s most important technological innovation and manufacturing base, is a leader on the road of China’s economic development. And in the past 30 years, it has ranked first in the foreign trade volume of cities in mainland China.
In fact, in the whole year of 2018, Vietnam’s total export volume has surpassed Shenzhen’s, but in March this year, it was twice that of Shenzhen, which surprised online public opinion, and was also discussing the cost of China’s epidemic prevention.
Three types of views
On the Chinese social media Weibo, the topic “Vietnam’s exports surpassed Shenzhen in March” was read 1.863 million times. The main points fall into three categories:
Some netizens believe that Shenzhen’s previous closure of the city and the transfer of orders have caused the current situation. For example, “When others develop the economy, we fight the epidemic, and the common people win.”
Another example is, “It’s not a stupid person who can see it. Others are full of hope. We played a good hand here.
Also, “It seems that Vietnam has more potential than China. China’s population began to decline this year, and it is about to enter a super-aging society, and it has no future.”
However, many netizens believe that it is not surprising that Vietnam has surpassed Shenzhen. For example, “One country exceeds one city, why panic?”; “Vietnam, one country, Shenzhen, one city. There is no comparison at all. Besides, why can’t Vietnam develop well?”
Another example is, “Don’t panic, he exports his, we will be our number one in the world.”
Some netizens also analyzed that this is “the result of the spillover from the Pearl River Delta”. And “China and Vietnam are not purely competitive in the industrial chain, but more complementary. Due to low labor force, Vietnam has undertaken the export of textile, assembly and other industries, and imported raw materials or components from China for assembly and export. Last year, China’s exports to Vietnam increased by 21% year-on-year. , a surplus of $45.6 billion.”
How to go beyond?
Vietnam and Shenzhen are indeed comparable.
In 1986, Vietnam began to learn from China and implemented the strategy of reform and opening up. At that time, the Shenzhen Special Economic Zone had been established for six years, and its development was in the ascendant. This year, according to the World Bank statistics, Vietnam’s export value was 1.74 billion US dollars; according to the Shenzhen Statistical Yearbook, this year, Shenzhen’s export value was 720 million US dollars, less than half of Vietnam’s.
However, Vietnam’s export scale has been hovering at a low level for many years, with slow growth. In 1988, it even shrank to 1 billion US dollars, and Shenzhen rose sharply to 1.84 billion US dollars. Since 1988, Shenzhen’s export volume has surpassed that of Vietnam, and has continued to lead for more than 20 years.
In 1990, Shenzhen’s exports started a “hurricane” mode, which increased nearly fourfold in one year. From $2.17 billion in 1989, it rose to $8.15 billion. Vietnam only rose from $1.5 billion to $2.3 billion. The export scale of the two places has widened the gap.
In 1995, Shenzhen’s export volume exceeded 20 billion US dollars; Vietnam’s exports only reached 20 billion US dollars in 2003.
After that, Vietnam started to catch up. In 2005, Shenzhen’s annual exports exceeded 100 billion US dollars; Vietnam reached this goal in 2011, 6 years later.
In 2013, after Shenzhen’s export value exceeded 300 billion US dollars, it ended the surge mode, and the export value even shrank, shrinking to more than 244 billion US dollars in 2017. In recent years, Vietnam has not stopped its growth. Instead, it has achieved a substantial growth of 18% in 2017, reaching 227.3 billion US dollars, which is almost the same as Shenzhen.
In 2018, the United States launched a trade war with China. In order to avoid trade barriers between Vietnam, China and the United States, multinational companies transferred a lot of production capacity to Vietnam. Shenzhen’s export volume stopped growing and entered a period of stagnation. Also in this year, Vietnam’s exports of US$259.5 billion (World Bank) surpassed Shenzhen’s US$246 billion (Shenzhen Statistical Yearbook) for the first time.
From being overtaken by Shenzhen in 1988 to overtaking Shenzhen, it has been exactly 30 years. It is undeniable that both Vietnam and Shenzhen have achieved world-renowned super growth.
This trade-off
As a frontier city of China’s reform and opening up, Shenzhen’s rapid development is familiar to Chinese readers.
The reasons for Vietnam’s rise are not difficult to understand. Vietnam is vigorously developing an export-oriented economy, taking advantage of lower labor costs to undertake garment, shoe, electronics and other production capacities from China. In addition, the Sino-US trade war that started in 2018 has prompted a group of enterprises to speed up their transfer to Vietnam.
Vietnam has also consciously amplified its own advantages. After joining the World Trade Organization (WTO) in 2007, it has signed free trade agreements with many countries around the world, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Vietnam and the European Union. The Free Trade Agreement (EVFTA), the Vietnam-UK Free Trade Agreement (UKVFTA), and most recently, the Regional Comprehensive Economic Partnership (RCEP), make it one of the countries that have signed the most FTAs.
Tran Thanh Hai, Deputy Director of the Import and Export Bureau of the Ministry of Industry and Trade of Vietnam, said that the biggest opportunity for Vietnam’s exports lies in various free trade agreements, and the biggest driving force for the growth of Vietnam’s exports is to play the role of free trade agreements.
It happened many years ago that Vietnam’s export volume surpassed Shenzhen, but the reason why it has sparked discussions in China today is that Shenzhen experienced a lockdown in March due to the epidemic. Although it was not as long as Shanghai, it had a significant impact on exports. , a double-digit decline.
Song Zheng, a professor at the Department of Economics at the Chinese University of Hong Kong, conducted a joint study with several scholars, using the monthly updated intercity truck traffic changes to calculate the actual income changes in each city, focusing on the analysis of the 16 city closures in the mainland after the Wuhan epidemic ended. Research estimates that if a megacity like Beijing, Shanghai, and Shenzhen is closed for two weeks, the impact on China’s GDP in that month will be roughly 2 percentage points (according to last year’s data, about 190 billion yuan), of which about 7% comes from indirect economic losses caused by the local lockdown to other cities.
This trade-off has made the gap between Vietnam and Shenzhen’s exports even wider, which has also aroused concern.
turn of events
However, to put the perspective between China and Vietnam, before the Omicron attack on the Chinese mainland, the situation was just the opposite.
In the past two years, China as a whole has enjoyed a super substitution effect. In other words, due to differences in epidemic control, China’s supply capacity is much higher than that of foreign countries, and exports have produced a significant substitution effect.
“China’s epidemic prevention measures are strict, and the supply chain has shown strong stability during the epidemic.” Xu Tianchen, an economic analyst at the Economist Intelligence Unit (EIU), introduced to the BBC in Chinese. At the same time, the Chinese government has tilted business and credit policies towards manufacturing. , fill the weak points and shortcomings in the industrial chain, in order to maintain and improve the level of manufacturing.
These reasons make multinational companies make the decision that is in the best interest – to return orders to China, which has fully resumed work.
As a result, in the second half of 2020, China’s foreign trade situation stopped falling and turned upward, and even in December 2020, China’s exports in US dollars increased by 18.1% year-on-year, far exceeding expectations. In 2020, the total value of import and export and export value both hit a record high, and China has become the only major economy in the world to achieve positive growth in trade in goods.
On the basis of such high growth, China’s foreign trade will continue to make great strides in 2021 – the annual export is 21.73 trillion yuan, an increase of 21.2%.
So far, China’s foreign trade import and export has achieved positive growth for six consecutive quarters. Three years after the trade war and two years after the outbreak of the new crown epidemic, the proportion of China’s trade scale in the world has reached a historical peak.
On the other hand, in Vietnam, in October last year, three months after the strict implementation of lockdown measures due to the new crown epidemic, the Vietnamese government announced the lifting of the blockade. Vietnam must not adopt the strategy of “coexisting with the virus” so that labor-intensive industries such as shoemaking, clothing, and electronic products, which are the lifeblood of the economy, can get back on track.
But unexpectedly, after the lockdown was lifted in October, tens of thousands of migrant workers in cities chose to flee the southern industrial zone and return to the countryside for fear of contracting the new crown. The team that left the city was spectacular. According to Vietnamese government statistics, 2.1 million migrant workers have left the city.
During the lockdown, the European Union Chamber of Commerce in Vietnam revealed that 18% of EU businesses in Vietnam have shifted their orders to other countries, and another 16% are considering doing so. A “labor shortage” that began last October could exacerbate this shift, with China being one of the most likely destinations.
Vietnam’s official statistics show that the country’s GDP fell by 6.17% year-on-year in the third quarter, the first quarterly decline since 2000.
At the beginning of 2022, Omicron attacked China, and Shenzhen and Shanghai were closed successively, causing China’s gross domestic product (GDP) to grow by only 4.8% year-on-year in the first quarter, which is still far from the annual growth target of 5.5%. Even so, the second quarter may be tougher for China. Xu Tianchen told the BBC Chinese that the first quarter data did not fully reflect the economic fragility caused by the new crown epidemic, because Shanghai did not open the city until the end of March, and the economic cost of closing the city in many cities may be more difficult for China, and consumer demand will still be Weakness, China’s domestic supply chain is experiencing unprecedented challenges.
In the same period, in the first quarter of 2022, Vietnam’s GDP reached US$92.175 billion, a year-on-year increase of 5.03%, higher than China’s growth in the same period. Moreover, after paying the unfavorable price of epidemic prevention last year, Vietnam has turned to the new normal of “coexisting with the epidemic”. This year, it was further liberalized. International tourism was even restarted on March 15. The first batch of overseas tourists ushered in, and the economy entered the track of full recovery.
What is the future of Vietnam?
After the downturn in the fourth quarter of last year and the boom in the first quarter of this year, what will the future of Vietnam’s economy look like?
“Looking through the label on your T-shirt, you will find that there are not many made in China,” a Fujianese trader who has been engaged in agricultural machinery trade in Southeast Asia for many years told the BBC in Chinese. He said that the transfer of China’s production capacity to Vietnam has been started many years ago, and it has continued. Instead, during the epidemic, due to inconvenient transportation, some plant construction plans were shelved, but it is estimated that it will continue soon.
Xu Tianchen expressed optimism about the advantages of China’s manufacturing industry in the post-epidemic era. He believes that in the medium and long term, China’s manufacturing industry has formed a scale and an industrial cluster at the regional level, which is still absolutely competitive and will remain a major manufacturing hub. At present, many countries are trying to diversify their supply chains. It is an emergency and supplementary measure, and cannot yet replace China’s manufacturing industry.
In other words, China’s emergence as the world‘s factory is the result of decades of growth, which means that parts of the industrial chain outside of China have been fully optimized around Chinese factories for higher profits. It took decades for manufacturing to move to China. It will not be possible to leave it in just a few years.
Shi Zhan, a professor at the China Foreign Affairs University, wrote an article after investigating Vietnam that the so-called “transfer” of manufacturing from China to Vietnam is actually the “spillover” of China’s supply chain. supply chains form a nested relationship.
“The overflow of supply chain links to Southeast Asia means that the scale of the China-centric supply chain network has become larger.” Shi Zhan believes that, on the premise of no substantial technological transition The transfer to China is final.
The above-mentioned trade people reminded that when they were in Vietnam, they often thought of China 30 years ago. The emerging industries have similar advantages and shortcomings, but at that time, the targets of China were Japan and South Korea, and the targets of Vietnam are currently China, and even Even the property market has skyrocketed.
As for the future of Vietnam? He asked: “Isn’t China also doing dirty and tiring work, and then slowly accumulating and transforming, establishing its own industrial chain, and finally realizing its rise? Why can’t Vietnam?”
The speed of Vietnam’s rise is indeed the same as that of China. In the past 20 years, Vietnam has increased its efforts to open up and attracted global foreign investment. From the textile industry to the electronics industry, Vietnam’s processing trade has achieved leapfrog development. In the past 20 years, Vietnam’s import and export volume has grown by 17 times. Companies investing in Vietnam have gradually changed from Nike and Adidas to Samsung, Intel, Dell, and LG. Only the eight factories invested by Samsung in Vietnam contribute about 20% to Vietnam’s GDP.