Vietnam: Under the weight of ChinaAugust 27th, 2011
Author: Le Hong Hiep, Vietnam National University
The analogy highlights the strategic importance of Vietnam toward China, especially in terms of security, while also suggesting that Vietnam must live under China’s weight. Vietnam is therefore, in Carlyle Thayer’s words, condemned to a ‘tyranny of geography’ where it has no choice but to learn to share its destiny with neighbouring China.This threat posed by China toward Vietnam comes not only from geographical proximity but also the asymmetry of size and power between the two countries. China is 29 times larger than Vietnam, while Vietnam’s population, despite being the world’s 14th largest, is still only equivalent to one of China’s mid-sized provinces.
Vietnam’s impressive economic performance since the late 1980s hasn’t allowed it to close the gap in strength. This is because China’s own economic modernisation has caused the power gap between the two countries to become ever wider. According to World Bank data, China’s GDP expanded more than 16 times between 1985 and 2009 from US$307 billion to US$4.985 trillion. Vietnam’s GDP increased only seven times over the same period, from US$16 billion in 1985 to US$97 billion in 2009.With its economic development, China’s military might has grown significantly, posing a formidable threat to Vietnam’s security. According to China’s official statements, its military budget for 2011 is US$91.5 billion, while Vietnam is said to have allocated US$2.6 billion. Particularly worrying for Vietnam is that China’s expanding military budget is concentrated on its air force and navy, strengthening China’s capacity to project power into the South China Sea where China and Vietnam have competing claims.
Vietnam’s transformation toward an open market economy also adds another aspect to this tyranny of geography: increased economic vulnerability.Since Vietnam resumed trade with China in the late 1980s, its domestic production has long been threatened by Chinese goods — flooding the country through both formal and informal (smuggling) trade.
Another vulnerability is Vietnam’s perennial trade deficit with China, amounting to US$5.4 billion out of the country’s total trade deficit of US$7.5 billion in the first half of 2011. China has also emerged as Vietnam’s largest source of imports, accounting for almost a quarter of its import turnover in 2010. Vietnam is heavily dependent on China for input materials for some of its major export industries, while Vietnam’s exports to China are just a minuscule portion of China’s total imports. Should China discontinue trade with Vietnam for some reason, the damage to Vietnam’s economy would be immense.Another concern is that Chinese companies have won up to 90 per cent of EPC (engineering, procurement and construction) contracts for Vietnam’s major industrial projects, especially those of coal-fired power plants. Chinese contractors are favoured as they offer cheap technology and promise to help arrange financial funding from Chinese banks.
