Thanh Nien News, 15 August 2015. China’s currency devaluation will hit Vietnam really hard: economists, by Ngoc Anh.

An edited extract of the original article is attached.

As Chinese products become cheaper, Vietnamese manufactures will struggle in both local and foreign markets.

Vietnam, which heavily trades with China, will face greater trade deficit risks after the yuan was devalued, giving Chinese exports a significant competitive edge, economists said.

China’s central bank on Thursday allowed its currency to drop against the dollar for a third straight day, although the devaluation was smaller than the ones seen earlier this week.

To boost China’s export competitiveness on international markets, the People’s Bank of China lowered the yuan by 2 percent on Tuesday, 1.6 percent on Wednesday and then 1.1 percent.

“This is a remarkable depreciation,” said economist Le Dang Doanh.

“Previously, Chinese exports, for many reasons, were already cheap compared to those from other countries. The devaluation will make them even cheaper, raising their competitiveness in export markets, including Vietnam.

“That’s what I’m really worried about,” Doanh said.

China is Vietnam’s top trading partner, but the world’s second-largest economy benefits more from the partnership.
Vietnam exported $14.9 billion worth of goods to China, but spent $43.7 billion on importing products from the northern neighbor last year, according to the General Statistics Office.

Economist Vu Dinh Anh said local products would fail to compete against Chinese cheap products in the domestic market.

Meanwhile, Vietnamese producers would find it harder to export their products to China and other markets because of higher prices compared to similar products orginated from China, he said.

The yuan devaluation would make it more challenging for Vietnam to deal with its trade deficit that has remained large for many years, he said…

 

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