Vietnam’s Economic Targets and Vietnam’s Balancing Policy towards USA and China
August 2024
The author of this article is Prof. Yu Xiangdong, is the Director of the Vietnam Research Institute of Zhengzhou University, China. This article was originally published in World Knowledge, Issue 8, 2024
Vietnam’s General Secretary Nguyen Phu Trong has passed away at the age of 80 and will be given a state funeral. Nguyen Phu Trong has long served in party affairs and made contributions in anti-corruption and diplomacy. After Nguyen Phu Trong’s death, Vietnam’s economy is expected to achieve stock market upgrades and growth but faces challenges from changes in the real estate industry and backward national conditions. Vietnam’s foreign relations will remain stable, and cooperation with China and the United States will continue. As the longest-serving general secretary of Vietnam since the new century, the death of Nguyen Phu Trong has not only attracted attention in Vietnam, but also sparked heated discussions around the world. While discussing and recalling this Vietnamese leader, people can’t help but start thinking about how Vietnam will develop after Nguyen Phu Trong’s death?
1. Poet Secretary
Nguyen Phu Trong is known as the “poet secretary” in Vietnam. When he was born and raised, the Vietcong had already established a firm foothold in the north, so Nguyen Phu Trong did not experience too many years of revolutionary war in his youth. After 1963, Nguyen Phu Trong was admitted to Hanoi University to study literature and joined the party during this period. After graduation, he did not join many young people at that time to participate in the revolutionary war in the south, but worked for a long time in the Communist Party of Vietnam’s party media “Communist” magazine, and gradually grew into an outstanding propaganda cadre with brilliant literary talent. During this period, he also studied at the Nguyen Ai Quoc Senior Party School (now the Ho Chi Minh National Academy of Political Science) and the Soviet Academy of Social Sciences, and obtained a postdoctoral degree. By 1991, he had become the editor-in-chief of the magazine “Communist”. In 1994, Nguyen Phu Trong became a member of the Central Committee of the Communist Party of Vietnam and soon became Secretary of the Hanoi Municipal Party Committee and a member of the Politburo of the Communist Party of Vietnam. In August 1999, he became a member of the Standing Committee of the Politburo of the Communist Party of Vietnam, becoming an important member of the Communist Party of Vietnam. In 2006, Nguyen Phu Trong became Chairman of the National Assembly, and then succeeded Nong Duc Manh as General Secretary of the Communist Party of Vietnam in 2011 until his death in 2024. He also served as President of Vietnam from 2018 to 2021.Nguyen Phu Trong has been in charge of party affairs for a long time. After becoming the general secretary, he made contributions to the discipline of the members of the Communist Party of Vietnam. In the “Burning Furnace” anti-corruption campaign initiated by him during his lifetime, 130,000 Communist Party members, including Dinh La Thang, secretary of the Ho Chi Minh City Party Committee, received anti-corruption sanctions, including more than 110 cadres at the central management level of the Communist Party of Vietnam. Even Vietnamese Deputy Prime Ministers Pham Binh Minh and Vu Duc Eum, Vietnamese Presidents Nguyen Xuan Phuc and Vu Van Thang, and National Assembly Chairman Vuong Dinh Hue were influenced and resigned from their posts. It can be seen that Nguyen Phu Trong is very determined and resolute in his anti-corruption efforts within the organization. Not only that, Nguyen Phu Trong also made contributions in diplomacy. His meeting with then-US President Obama in July 2015 made him the first Vietnamese top leader to visit the United States, promoting future economic cooperation between Vietnam and the United States.
2. Where is Vietnam heading?
Before Nguyen Phu Trong’s death, many of Vietnam’s party and government affairs had been handed over to 67-year-old Vietnamese President To Lam. In the current Vietnamese political arena, To Lam is obviously the first leader in line, and his position as president represents the identity of the head of state of Vietnam. Therefore, it is not difficult to judge that To Lam will “take over” for some time in the future. However, it should be noted that To Lam did not work in the party affairs organization of the Communist Party of Vietnam now and has no experience of working in the party affairs system in the past. His main work department was in the field of public security. Therefore, it is unlikely that he will serve as the general secretary of the Communist Party of Vietnam again. The position of General Secretary of the Communist Party of Vietnam will probably be taken over by someone with rich experience in party affairs in subsequent discussions. Of course, what the outside world is most concerned about is Vietnam’s future economic and diplomatic development.
Economy
In terms of economy, Nguyen Phu Trong set three major goals before his death, namely, to make Vietnam escape from the ranks of lower-middle-income developing countries and become an upper-middle-income country by 2025. The target was making Vietnam a high-income country in 2030, at the 100th anniversary of the founding of the Communist Party of Vietnam. By 2045, the 100th anniversary of Vietnam’s founding, Vietnam will become a high-income developed country. These three goals are the important directions of Vietnam’s current economic development. As for the first goal, according to the standards released by the World Bank in 2020, countries with a gross national income (GNI) below $1,036 are considered low-income, and those with a GNI between $1,036 and $4,255 are considered lower-middle-income. Countries with a GNI between $4,255 and $13,846 are considered upper-middle-income countries. Countries with a GNI greater than $13,846 have reached the level of high-income countries. Vietnam’s GNI in 2019 was around US$2,600. Even though the COVID-19 pandemic has had a certain impact on it, Vietnam’s GNI is still growing strongly. By 2023, Vietnam’s GNI will have exceeded US$4,000. Not to mention breaking through the threshold of US$4,255 in 2025, it will be able to break through in 2024. Therefore, it will not be difficult for Vietnam to achieve the first goal.
However, it is still difficult for Vietnam to achieve the level of a high-income country. After all, even China’s GNI will only reach 125,970 US dollars in 2023, which does not reach the threshold of a high-income country. If Vietnam wants to achieve this goal in 2030, it means that Vietnam must reach a GNI level that exceeds China in the next six years to achieve this goal. As for becoming a high-income developed country by 2045, there are actually quite a few difficulties. After all, according to the World Bank’s classification standards, among the 34 high-income developed countries in the world today, even Latvia, which ranks last, has a GNI of more than 20,000 US dollars, while the UK, France, New Zealand and Japan can reach a GNI of 30,000 US dollars. It is not easy for Vietnam to achieve this goal in the next 21 years.
At present, the three pillars of Vietnam’s economic development are mainly financial services, real estate and manufacturing. Among them, as of March 2024, the total value of Vietnam’s financial industry has reached US$269 billion, accounting for about 66% of Vietnam’s GDP, and there are about 2,300 listed companies and 82 active securities companies in its stock market. Vietnam has achieved a stock market growth of more than 10% in three of the past five years. Coupled with its stable political environment and relatively strong economic growth, its stock market has a promising future. Therefore, Vietnam is currently in contact with international rating agencies such as FTSE Russell and Morgan Stanley, hoping to be included in the emerging market by 2025 (Vietnam is currently a border market). Once this goal is achieved, Vietnam is likely to attract at least $25 billion in foreign investment into its stock market by 2030, which will be a strong boost to the country’s economic development. Considering that Vietnam’s upgrade thresholds do not conflict much with those of Morgan Stanley and FTSE Russell, its goal of upgrading its stock market is likely to be achievable. In terms of real estate, Vietnam’s real estate industry has played a role in boosting infrastructure and accumulating wealth, but its huge real estate bubble also hides many dangerous factors. Not only will it fail to promote economic growth in the future, but it is more likely to drag down Vietnam’s economy. In terms of manufacturing, Vietnam has fully utilized the opportunities of global industrial chain transfer since the new century, attracted a large amount of foreign investment, and supported a number of local enterprises.
Especially in recent years, Western countries have been keen to transfer some industrial chains originally in China to Vietnam, which has also stimulated the development of Vietnam’s manufacturing industry to a certain extent, making Vietnam’s total foreign trade in 2023 reach approximately US$650 billion, of which exports reached US$355.5 billion and the trade surplus reached US$104 billion. Overall, it is foreseeable that due to the stable political situation and economic growth rate of more than 6%, coupled with the growth of foreign trade and stock markets, Vietnam’s economy still has a lot of room for improvement after Nguyen Phu Trong’s death. However, Vietnam’s relatively backward transportation infrastructure and technological level, as well as its limited foreign exchange reserves and economic structure, make it very vulnerable to international economic crises. Therefore, its development ceiling will not be too high.
Foreign Diplomacy
In terms of foreign relations, Vietnam has actually made economic construction the top priority of the Communist Party of Vietnam after experiencing a series of wars and reforms and opening up during the Cold War. In this context, although there are certain conflicts of interest between Vietnam and its neighboring Cambodia and China, the possibility of armed conflict between Vietnam and them is very low. In fact, in the current environment of Sino-US competition in the Western Pacific, Vietnam’s diplomacy is taking a middle road of playing both sides. Vietnam does not really want to get involved in the Sino-US competition. For Vietnam, the United States and China are their second and first largest trading partners respectively, and offending either of them is not a good choice. Vietnam has many options to get close to, and Vietnam will not be one-sided when dealing with China and the United States. With regard to China relations, successive Vietnamese governments and party organizations have mainly adopted an attitude of cooperation and wooing. Especially in terms of party affairs exchanges, the two sides have had very frequent high-level interactions in recent years, which can prove from the side that China-Vietnam relations will remain stable in the future. Of course, it is worth noting that in recent years, South Korean, Japanese and European capital have also increased their investment in Vietnam, and Vietnam is also actively exploring cooperation with these regions. It is expected that Vietnam will export more goods to these places in the future. These major policies are unlikely to change much no matter who comes to power. In summary, after the death of Nguyen Phu Trong, Vietnam may soon achieve a stock market upgrade in recent years, break through the threshold of upper-middle-income countries, and achieve economic growth and political stability, and its domestic and foreign policies will not change much. However, due to changes in the real estate industry and the backward national conditions, the challenges facing its development are also very serious.
References:
1, 2022.10.29-Xinhuanet-Nguyen Phu Trong, General Secretary of the Communist Party of Vietnam
2, 2024.3.10-Wall Street Journal-The key to determining the direction of Vietnam’s stock market: entering the rich! 3. 2024-7-19-China News Weekly-Nguyen Phu Trong passed away. He said before his death that he was “not in good health”