Skip Chinese goods, even though the price is three times higher, still buy Korean goods

Buying Korean products is not too difficult because more and more “Made in Korea” stores are appearing in Hanoi. However, there is another risk: the trade deficit with this country is increasing significantly.

Thanks to good quality and not too expensive prices, Korean consumer goods are quickly entering the Vietnamese market.

Compare with Chinese and Japanese goods

In recent years, Korean goods have gradually dominated the Vietnamese market. Stores specializing in selling imported goods from Korea not only appear on the streets, but goods originating from the land of Kimchi have also entered supermarkets and shopping malls thanks to their good quality (better than Chinese goods) and not too expensive prices (like Japanese goods). Although they are twice or three times more expensive than Vietnamese goods, Korean goods are still favored by consumers.

At a store specializing in selling imported goods from Korea on Pham Ngoc Thach Street (Dong Da, Hanoi), only about 20 square meters but there are hundreds of different items for sale. From shoes, cosmetics, candy, instant noodles, dishwashing liquid, drinks, umbrellas, even popcorn (a snack that appears everywhere in Vietnam)... Customers coming in and out to buy and sell here are quite bustling.

Ms. Nguyen Thi Ngoc Anh, a person who is shopping here, shared: “For about 2 years now, my family has often used Korean products, mostly cosmetics. Before, I had to ask my relatives in Korea to buy and send them back, but now I can go to stores that sell Korean products, so I can buy them comfortably. The prices are more expensive than products made in Vietnam, but the quality is assured.”

Similarly, Ms. Nguyen Thi Nam (Tran Duy Hung, Cau Giay, Hanoi) also said that 70% of consumer goods in her house are from Korea.

“My husband is Korean. At first, I only went to Korean stores to buy food because my husband was not used to Vietnamese food. After a while, I saw that the quality of Korean products was very good, so other family members also liked to use them, so I bought more types,” said Ms. Nam.

The owner of a Korean goods store said that at first, the customers were mainly Koreans living and working in Vietnam. However, in recent years, the number of Vietnamese people coming to buy goods has increased, and many branches have even opened to serve Vietnamese people. To date, she has 5 stores selling Korean goods.

It is clear that by now, Vietnamese people are very familiar with Korean brands, from delicacies, elixirs such as ginseng, lingzhi mushrooms... to multifunctional household appliances, easy-to-use devices. Some companies that sell massage machines, infrared rays, health and beauty care... are competing to open. Even Korean blankets, sheets, pillows, mattresses, clothes, and cosmetics are coming to the countryside.

formidable trade deficit

Korean goods entering Vietnam is also understandable because in the trade relationship between the two countries, within 10 years, turnover has increased nearly 42 times, from 0.5 billion USD in 1992 to 21 billion USD in 2012. In just the first 10 months of this year, that figure was nearly 23 billion USD, an increase of over 32% over the same period last year, far surpassing the figure for the whole of 2012. Korea is currently Vietnam's fourth largest trading partner, and Vietnam is Korea's sixth largest export market.

However, clarifying the import-export structure immediately reveals the imbalance in the trade balance between the two sides.

While Vietnam exports only 5.5 billion USD to Korea, we are importing 15.5 billion USD. Thus, Vietnam's trade deficit is 10 billion USD, the trade deficit ratio is 179%. This ratio in the first 10 months of this year is up to 216%.

Compared to the trade deficit with China, Vietnam's trade deficit with South Korea is higher in absolute value but the percentage is very high (China's trade deficit in the same 10 months of 2013 was 19.7 billion USD - but the trade deficit rate was 186%).

In Vietnam's total trade deficit, the proportion of trade deficit with Korea is also increasing. In 2009 it was 37%, in 2010 it reached 50%, in 2011 it jumped to 83%.

The trade deficit with South Korea is clearly revealed through the two-way commodity structure. Vietnam exports crude oil, coal, coffee, seafood, rubber... to South Korea, which are raw goods; while wood products, textiles, and footwear are called processed industrial goods, but they are purely processed, even processed at a low level.

However, we import from Korea complete and valuable industrial products such as: computers, electronics, components, complete cars, car parts, machinery and equipment, spare parts, iron and steel, raw plastics, fabrics of all kinds, leather and footwear materials. Increasing the export of assembled and semi-processed goods in Vietnam only brings modest wages to those who work there. Investment projects in Vietnam are mainly in the form of "instant noodles", not for the transfer of advanced technology.

Vietnam's trade has been struggling to cope with the huge trade deficit with China, now there is a new concern named South Korea.

According to Vietnam Economic Forum