Yuan devaluation expected to put Vietnam’s exports at risk
Yuan devaluation expected to put Vietnam’s exports at risk
Vietnam’s goods shipments to China will have difficulty earning a profit as China’s currency has been devalued sharply due to the ongoing U.S.-Sino trade dispute, the local media reported.
After U.S. President Donald Trump announced another 10% tax bill on US$300 billion worth of Chinese products, which takes effect on September 1, China’s yuan dipped sharply against the greenback, reaching the lowest level since May 2018.
Pham Tat Thang, former head of the Trade Research Institute, under the Ministry of Industry and Trade, stated that the move will severely affect Vietnam’s exports due to the expected sharp depreciation of the yuan, VietnamPlus news site reported.
The trade war has expanded into a currency war, Thang said, adding that China has devalued its yuan to minimize the impact of the United States’ tax imposition.
The yuan devaluation is expected to lower profits for Vietnam’s high-volume exports to China, with some exports earning no profits at all.
As such, local enterprises were advised to seek other import markets that have signed a free trade agreement with Vietnam.
Although Vietnamese enterprises are allowed to use the yuan to conduct transactions in some border provinces, the yuan’s devaluation will increase the value of the Vietnamese dong, resulting in a drop in profits from goods purchases.
Thang suggested that Vietnam take prompt action to prevent the currency trade from affecting the country’s currency market.
He proposed the Government keep a close eye on the exchange rates between the Vietnamese dong and other currencies in the global market.
Recently, some goods importers in Vietnam have violated regulations on the origins of products, with products fraudulently carrying “Made in Vietnam” labels to evade taxes.
Product origin fraud will hurt Vietnam’s exports to other markets. Therefore, the Government, the competent agencies and enterprises should not let Chinese goods bearing “Made in Vietnam” labels be exported to foreign countries, especially the United States.
Mai Huu Tin, chairman of U&I Group, said that the yuan’s devaluation will benefit China’s shipments to other foreign markets, including Vietnam. The shift of factories from China to Vietnam is expected to become faster as a result of the escalating trade war between the two largest economies and the yuan’s devaluation.
The competition between domestic enterprises and Chinese firms will also grow fiercer, Tin said.
Nguyen Lam Vien, chairman of Vinamit JSC, voiced concern over the decline in profits from exports to China, pointing out that even though Vinamit is supplying products to multinational retailer Walmart in China with payments made in U.S. dollars, its partners in China have asked the firm to renegotiate the prices of its products.
Doan Van Sang, director of Cat Tuong Company in Tien Giang Province, stated that the yuan’s devaluation will definitely reduce their products’ export value. However, he noted that exports through formal channels, which are required to pay with U.S. dollars, will suffer less than transactions through informal channels, where the yuan is used for payments.
China is one of Vietnam’s largest tra fish buyers, so the yuan’s devaluation will significantly affect tra fish exports, remarked Nguyen Van Kich, former vice chairman of the Vietnam Pangasius Association.
Vietnamese tra fish farmers and processers will face difficulty in the coming months due to the current oversupply of tra fish and the yuan’s devaluation, Kich said, adding that apart from this, since the beginning of the year, Chinese enterprises have reduced imports of Vietnam’s tra fish due to tightened policies around informal imports.
Pham Sy Thanh, director of the Chinese Economic Studies Program, told Nguoi Lao Dong newspaper that China’s yuan devaluation was aimed at weakening the impact of export duties through exchange rates. The advantages of Chinese goods are mainly from their economies of scale and supply chain rather than low prices.
Meanwhile, financial expert Can Van Luc said Vietnam needs to stay calm and should not devalue its currency, to avoid being accused of manipulating currency by the United States.
