Vietnam to gain from China reopening: economists

“We expect China’s re-opening to boost Vietnam’s GDP growth by over 2% points next year, driven by the full resumption of Chinese tourist arrivals in the second half of 2023,” said Michael Kokalari, chief economist of investment fund VinaCapital, adding that China accounted for one-third of Vietnam’s pre-Covid total tourist arrivals.

Kokalari expects the number of foreign tourist arrivals to climb more than 50% over pre-Covid levels in 2023 based on the assumption that Chinese touriss fully recovers in the second half of next year.

The pace of recent developments in China point to a possible faster full resumption of Chinese tourist arrivals, which could lead to an even larger contribution to Vietnam’s GDP growth next year than currently expected, he added.

Starting Jan. 8, China dropped most Covid testing requirements, scrapped contact tracing and resumed immigration at border gates with Vietnam after three years of imposing various levels of restrictions to curb the spread of the pandemic.

Over the three-year period Vietnam has been somewhat hurt by the stringent border safety measures imposed by its second largest export market behind the U.S.

Vietnam’s trade deficit with China, its biggest import market, rose 11.5% from 2021 to $60.9 billion last year, according to the General Statistics Office of Vietnam.

In December 2021, up to 4,000 containers from Vietnam were stuck at the border with China as the latter tightened its Covid-19 measures.

But a different picture is now seen at the border. Each day around 1,000 vehicles pass through Huu Nghi Border Gate in Lang Son Province to enter China, said Tran Van Hung, deputy head of the gate’s border guard unit.

Nguyen Cong Kinh, CEO of agriculture produce exporter Cao Thanh Phat, said that since the reopening his company has been able to shorten delivery times to China by using roads instead of sea shipping.

The price of fruit in the Mekong Delta has increased as a result, he told local media, adding that he is struggling to source enough dragon fruit to meet the needs of Chinese buyers.

Shrimp exporter Thanh Nhon has seen an increase of 40% in orders from China since the reopening.

There was already “a little explosion” of activity among Chinese manufacturers shifting production to Vietnam, and the reopening since Sunday will stir more activity in the supply chain, said Paul Tonkes, industrial deputy director of factory developer Core5 Vietnam.

“Things are picking up,” he told Nikkei Asia by phone. “Business was put on hold or under pressure for quite some time,” but now there’s a “release”.

Other economist said that China’s reopening will also have a positive impact on the global economy, including Vietnam, beginning in mid-2023.

“Around April or May, China will be more confident about its open-door policy, and this will create opportunities for Vietnam’s exports and tourism,” said Nguyen Xuan Thanh of Fulbright University Vietnam.

Kokalari said that in addition to a trade boost, the most immediate impact has been the improvement in the sentiment towards the Vietnamese dong, as the surge in the value of China’s currency was the primary factor that drove the rebound in the value of the dong at the end of December.

He added that Vietnam’s stock market benchmark VN-Index could also expect a boost from China’s reopening.