VN currency suffers from US-China trade war

The Government will have to decide either to devalue the Vietnamese dong further against the US dollar to support exports and avoid cheaper Chinese goods to flood in the local market or keep the dollar dong exchange rate stable to avoid increased public debt and control inflation as the US China trade war accelerates
vn currency suffers from us china trade war

As the trade war escalates, China has weakened its currency to boost exports, making its goods even cheaper in Vietnam.

Banking expert Nguyen Tri Hieu said while the Chinese yuan had lost 4% against the dollar since the beginning of this year, the dong had devalued by only 1.5% against the dollar. The đồng had also appreciated by some 1.8% against the yuan to date this year.

The moves made Chinese imports much cheaper, Hieu said, adding that Vietnam had to balance between controlling the trade deficit and being able to compete with cheaper Chinese goods in the market.

Hieu said the Government should remain cautious as the yuan could fall even further.

According to Hieu, China has set the yuan’s foreign exchange rate at 6.95 per dollar, but around two years ago, that number was even lower at 6.69 per dollar, so there was potential for the yuan to slip further.

At this moment, Hieu said, a further devaluation of the dong was not necessary. However, if the trade war continued, the dong should be devalued by another 1.5% this year to offset the devaluation of the yuan against the dollar.

A further devaluation of the đồng would support Vietnam’s exports and prevent Chinese products from flooding Vietnam like in 2015 when the yuan devalued sharply against the dollar, Hieu said.

However, Hieu also said a sharp devaluation of the dong could also cause a rise in Vietnam’s public debts and inflation. He explained that more than half of the nation’s debts were in dollars.

Nguyen Duc Thanh, director of the Vietnam Institute for Economic and Policy Research (VEPR), also said that Vietnam should develop a policy to devalue the dong against the dollar at a moderate level to import cheap raw materials to improve the production status in the context of the US-China trade war and the devaluation of the yuan.

According to Thanh, Vietnam imports raw materials from China to process and export, and the adjustment of the exchange rate will benefit importers from and exporters to the US. Taking advantage of the two big markets can improve production and the trade balance.

The US and China are Vietnam’s two most important trade partners. China is the largest import market with turnover of US$31.1 billion, with key commodities including fabric, phones and accessories and accounting for one fourth of total import turnover. China has replaced the Republic of Korea as Vietnam’s biggest trade partner.

In terms of exports, the US is Vietnam’s largest market with export turnover of US$21.5 billion in the first half of 2018, increasing 9.2% compared to the same period in 2017 and accounting for one fifth of Vietnam’s total export turnover.

According to Thanh, when the yuan fell sharply and the dollar showed signs of price appreciation, Vietnam’s trade balance was greatly impacted due to cheap Chinese goods flowing into the domestic market.

“The exchange rate will still suffer from pressure in the context of international financial markets showing concerns about the escalation of the US-China trade war. Vietnam should develop a policy to devalue the đồng against the dollar at a sensible rate, and lower than the devaluation of the yuan against the dollar to benefit and improve production,” Thanh recommended.

Economist Ngo Tri Long, former director of the Market Price Research Institute under the Ministry of Finance, said that the central bank should adjust the exchange rate based on the market and not the yuan.

Long said adjusting the đồng’s value at the moment was a risky move.

It would be hard to achieve the nation’s target of keeping inflation below 4% this year, not to mention other factors such as higher oil prices and natural disasters, Long said.

If Vietnam decided to move forward with devaluing the dong, the adjustments should be based on market demand and not on the yuan’s value, Long said, adding that a 2% drop would better match current market conditions.

Source: VNS

Related News

Bright spots at the beginning of the year

Bright spots at the beginning of the year

VCN - Production and business activities of enterprises have been vibrant since the first days of the year, thanks to which, many economic indicators in the first 2 months of 2024 are positive and positive. This is the fulcrum of trust and motivation for businesses to continue to develop.
Vietnam experiences a trade surplus of over US$11 billion in two months

Vietnam experiences a trade surplus of over US$11 billion in two months

VCN - The trade turnover between Vietnam and China reach over US$27 billion only in two months
The Minister of Finance chaired the Vietnam - Korea Financial Investment Promotion Conference

The Minister of Finance chaired the Vietnam - Korea Financial Investment Promotion Conference

On March 7, in Seoul Capital, South Korea, the State Securities Commission (SSC) organized a financial investment promotion conference with the theme "Vietnam - Investment destination". Minister of Finance Ho Duc Phoc attended and chaired the Conference.
Hundreds of billions of dong are collected from exporting one type of drink every month

Hundreds of billions of dong are collected from exporting one type of drink every month

VCN - In less than two months, tea exports earned nearly US$24.2 million (equivalent to about VND600 billion), a sharp increase compared to the same period last year.

Latest News

Central bank urges card issuers to review procedures

Central bank urges card issuers to review procedures

The State Bank of Vietnam (SBV) has issued a directive, demanding commercial banks to review their procedures in issuing and managing bank cards.
Warning about impersonating tax authorities to commit fraud during  tax finalization month

Warning about impersonating tax authorities to commit fraud during tax finalization month

VCN - The Tax industry has continuously provided information and issued warnings about impersonating tax officials and tax authorities to commit fraud against taxpayers, but there are still people who fall into the trap of these fraudsters, especially during the peak month of tax settlement.
“3 priorities, 3 breakthroughs” in task deployment of State Treasury

“3 priorities, 3 breakthroughs” in task deployment of State Treasury

VCN - To complete the task from now until the end of 2024 and successfully implement the State Treasury Development Strategy as planned, Deputy Minister of Finance Bui Van Khang stated "3 priorities, 3 breakthroughs" " and 7 notes in task performance.
Effectively apply M&A to go long distance

Effectively apply M&A to go long distance

VCN - With advantages such as being cheaper than domestic capital, and accompanied by many factors such as technology, skills, management, market... foreign capital is a popular trend among businesses. Domestic enterprises seek through M&A activities to ensure sustainable development for the future.

More News

Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury proactively digitizes and transforms operating methods

VCN - Hanoi State Treasury always proactively transforms and reforms its operating methods with the motto of “taking customers as the center” and taking the satisfaction of organizations and individuals as a measured level of task completion by civil servants.
The Ministry of Finance continues to strongly improve the business environment, reducing the rate of businesses temporarily suspending operations

The Ministry of Finance continues to strongly improve the business environment, reducing the rate of businesses temporarily suspending operations

VCN - The Ministry of Finance aims to continue to strongly improve the business environment, create a healthy competitive environment, rapidly increase the number of newly established businesses, and reduce the rate of businesses temporarily suspending operations; reduce input costs and legal compliance costs in investment and business activities, reduce policy risks, strengthen trust, create a fulcrum for recovery and improve business resilience.
Vietnam tackles obstacles to stock market upgrade

Vietnam tackles obstacles to stock market upgrade

Vietnam's ambition to elevate its stock market from "frontier" to "emerging" status by 2025 faces two key hurdles, including pre-trade margin requirements for foreign investors and foreign ownership ratios in certain sectors, said Deputy Director of the Securities Market Development Department under the State Securities Commission (SSC) Pham Thi Thuy Linh.
Looking forward clear instructions in tax finalization in 2023

Looking forward clear instructions in tax finalization in 2023

VCN - Mr. Hoang Quang Phong (photo), Vice Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) discussed supporting taxpayers in tax finalization in 2023.
Proactive in dealing with exchange rate pressure

Proactive in dealing with exchange rate pressure

VCN - Recently, the State of Bank (SBV) withdrew VND 30,000 billion through the T-bills channel, contributing to reducing exchange rate pressure. This is just one of the moves of the monetary policy management agency to stabilize the foreign exchange market, contributing to supporting the macro economy as well as import-export business activities of enterprises.
Tax sector accompanies and supports tax finalization

Tax sector accompanies and supports tax finalization

VCN - In the first months of 2024, the Tax sector has deployed peak months to support tax finalization in many different forms, thereby solving many problems in settlement of corporate income tax and personal income tax for taxpayers.
Minister of Finance: Fairness and transparency for the insurance market

Minister of Finance: Fairness and transparency for the insurance market

VCN - According to Minister of Finance Ho Duc Phoc, the Ministry has strengthened inspections to correct violations in the insurance sector, demonstrating fairness and transparency in the market.
Vietnamese securities companies race to boost capital amid high market demand

Vietnamese securities companies race to boost capital amid high market demand

These companies understand the importance of boosting their capital to remain competitive and avoid falling behind their peers.
Central bank required to take urgent measures to stabilise gold market

Central bank required to take urgent measures to stabilise gold market

The Government has directed the State Bank of Vietnam (SBV) to urgently inspect and supervise to stabilise the gold market.
Read More

Your care

Latest Most read
Central bank urges card issuers to review procedures

Central bank urges card issuers to review procedures

The State Bank of Vietnam (SBV) has issued a directive, demanding commercial banks to review their procedures in issuing and managing bank cards.
Warning about impersonating tax authorities to commit fraud during  tax finalization month

Warning about impersonating tax authorities to commit fraud during tax finalization month

VCN - The Tax industry has continuously provided information and issued warnings about impersonating tax officials and tax authorities to commit fraud against taxpayers, but there are still people who fall into the trap of these fraudsters, especially dur
“3 priorities, 3 breakthroughs” in task deployment of State Treasury

“3 priorities, 3 breakthroughs” in task deployment of State Treasury

To successfully implement the State Treasury Development Strategy as planned, Deputy Minister of Finance Bui Van Khang stated "3 priorities, 3 breakthroughs" " and 7 notes in task performance.
Effectively apply M&A to go long distance

Effectively apply M&A to go long distance

VCN - Sharing at the conference "Consumer goods and distribution industry: M&A trends and investment strategies to raise capital for Vietnamese enterprises", organized by the Business Association of High Quality Vietnamese Goods and the Leading Business C
Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury always proactively transforms and reforms its operating methods with the motto of “taking customers as the center” and taking the satisfaction of organizations and individuals as a measured level of task completion by civil servants.
Mobile Version