Feb 11, 2019 / 09:59

Numerous industries in Vietnam to face challenges from Chinese slowdown

The Hanoitimes - According to experts, the declining demand from the world’s second-largest economy will directly affect not only Vietnam`s exports, but also the global supply chain.

Chinese’s economic slowdown could weight on many industries in Vietnam in the wake of a sharp drop in demands from one of the country’s key export markets, experts warned.
Vietnam’s mobile phone export has declined due to Chinese faltering demands
Vietnam’s mobile phone export has declined due to Chinese faltering demands
According to a recent report, Saigon Securities Inc.’s Retail Research said that some industries, such as mobile phone, fruits and vegetable, wooden and camera production, have so far suffered adverse impacts of the Chinese slowdown, which has resulted in faltering import demand from the market.
The report showed export growth rates of the Vietnamese products slowed from August last year and then declined in the last two months of the year.
The negative impacts will continue spreading in many other industries this year when China’s economic growth is projected to be even lower than last year, SSI’s analysts said, emphasizing that China accounts for 17 percent of Vietnam's export market share.
China’s growth cooled in the fourth quarter under pressure from faltering domestic demand and bruising US tariffs, dragging the country’s 2018 growth to the lowest level in nearly three decades while Purchasing Managers' Index (PMI) also fell below the neutral 50-point mark for the first time after 18 months as production and export orders declined due to trade conflicts with the US.
According to China’s National Bureau of Statistics, the country’s GDP in the last quarter of last year grew at the slowest pace since the global financial crisis, easing to 6.4 percent year-on-year from 6.5 percent in the third quarter. That pulled China’s full-year growth down to 6.6 percent, the slowest annual pace since 1990.
According to experts, the declining demand from the world’s second-largest economy will directly affect not only Vietnam's exports, but also the global supply chain.
According to Sudhir Shetty, chief economist for the World Bank’s East Asia and Pacific Region, global growth was estimated at 3 percent for 2018 but it would be below 3 percent, and the main reason for the global economic slowdown is due to slower growth of the Chinese economy.
Potential risks to the global economic growth include an escalation in global protectionism and heightened financial market turbulence, he added.
Focus on internal strength  
Vietnam must prepare itself for the slowing global economy and minimize its vulnerability by increasing internal strength and making the best use of foreign capital, while working with the international community towards a free-trade world, and adapting to any possible changes, experts recommended.
According to Sudhir Shetty from the WB, Vietnam should utilize policies to mitigate short term vulnerabilities through better fiscal policies, deepen reforms to enhance competitiveness on trade and investment policies, build skills by improving access to post-secondary education, and promote inclusion by expanding employment services and broadening access to digital technologies.
Meanwhile, former Deputy Prime Minister Vu Khoan  suggested it’s a must for Vietnam to transform its economic growth model as its natural resources are running out and technological advancements mean fewer job opportunities for low-cost labor..
Ousmane Dione, World Bank country director for Vietnam, suggested that the private sector is key to driving the Vietnamese economy by increasing productivity and creating more added value.
One solution to empower the local business community is to resolve existing issues in the regulatory system which is preventing companies from reaching their full potential, Ousmane said.
Besides, he said, corporate governance quality should get better and foreign capital must be used to improve technological backgrounds and added value for local firms so they could link together and join the global value chain.