Vietnam PM: China is a friend, but Hanoi will protect sovereignty


Key state-owned enterprise reform ‘needs to take place much faster’

DAVOS, Switzerland — China’s ongoing trade war with the U.S. and the slowdown of its economy, the world’s second largest, are taking an expensive toll on its neighbors. Times are especially hard for Vietnam, as its relationship with its powerful neighbor in the north is further complicated by a dispute over islands in the South China Sea.

Vietnamese Prime Minister Nguyen Xuan Phuc told the Nikkei Asian Review on Thursday at the sidelines of a session at the annual meeting of the World Economic Forum that “China is our neighbor and our friend, and we will try to resolve all issues with them.” Phuc added: “Vietnam hopes to promote trade with China.”

China is Vietnam’s second largest trading partner after the U.S., and direct inward investments by Chinese companies are surging. Vietnam has been reaping the windfalls from the intensified Beijing-Washington trade war as multinationals relocate manufacturing facilities to the Southeast Asian country. But the gradual slowing of the Chinese economy is beginning to bite into Vietnam’s growth prospects too.

Gareth Leather, senior Asia economist at Capital Economics, wrote on Tuesday: “Weaker growth in China is already weighing on exports from the rest of Asia, and a further slowdown in the economy is one of the biggest risks clouding the outlook for the rest of the region.” He especially pinpointed Vietnam and Taiwan, with notably close Chinese trade ties, as the ones to suffer the most collateral damage.

At least on the surface, Vietnam is on friendly terms with China. On Tuesday, Vietnam’s supreme leader Nguyen Phu Trong, general secretary the Communist Party and president of the country, expressed his willingness to further consolidate and develop his friendship to the recently appointed Chinese Ambassador to Hanoi Xiong Bo, according to Chinese state-owned mouthpiece Xinhua.

However, such cozy bilateral relationship becomes edgier in the fundamental issue of territorial integrity. Prime Minister Phuc did not forget to assert that Vietnam will “protect our own legitimate interests and sovereignty” along with enhancing closer economic ties. China’s entire claims to the islands and the waters in the South China Sea directly pitch it head-to-head with Vietnam’s claims to Hoang Sa (Paracel) and the Truong Sa (Spratly) island chains.

Turning inward, the prime minister admitted that the government’s key policy of reforming state-owned enterprises needs to accelerate to benefit the economy. Phuc pointed to partial successes in inviting overseas investments in banking and other state-owned sectors, but said, “I agree that this process needs to take place much faster.”