China 'paralyzed' by Corona, the virus deepens the 'gap' in Vietnamese goods

Difficulties in both "export - import" directions

In recent days, the prices of Vietnamese agricultural products have fallen because they cannot be shipped to China due to the acute pneumonia epidemic. Tens of thousands of tons of dragon fruit, watermelon, seafood, etc. are unsold. For example, durian, before Tet, was priced at 70,000 VND/kg, now it is only 40,000 VND/kg; dragon fruit is only 3,000 - 4,000 VND/kg, in some places the price of watermelon is only 1,000 VND/kg.

Reports from the Ministry of Industry and Trade as well as the Ministry of Agriculture and Rural Development point out a worrying reality. According to the Ministry of Industry and Trade's forecast, import-export activities will inevitably be negatively affected in the short and medium term, possibly lasting from 6 to 8 months.

Watermelon sales are stagnant, waiting for rescue. Photo: Internet

In particular, consumption demand decreased due to the closure of store chains in China. Specifically, the Starbucks chain in China closed thousands of stores, affecting coffee consumption; the McDonald's chain closed hundreds of stores, affecting fish fillet consumption; restaurants and food chains were deserted, leading to a decrease in demand for seafood...

In addition, the border market opened later than usual, and will be closed until February 8, causing disruptions in people's exchanges while this is still an important form of exchange for some of our agricultural products, especially fruits.

Chinese buyers also cannot come to Vietnam as usual, so there are no new orders even though some types of fruit are in season.

Regarding the seafood industry, Mr. Nguyen Hoai Nam (Deputy General Secretary of the Vietnam Association of Seafood Exporters and Producers) said: Currently, there have been no cancellations of orders for seafood products due to the Corona virus flu epidemic, but there have been delays and adjustments to orders. Partners promised to start receiving goods on February 16. The immediate difficulty is that some large shipping lines have stopped accepting containers of goods to China. Major Japanese customers have requested not to send goods to China.

That is the case with exports. Importing raw materials for domestic production can also be problematic.

Because China extended the Tet holiday due to the complicated epidemic situation, many factories have not yet operated, so the supply of raw materials to customers in Vietnam is also at risk of being interrupted.

Textiles, footwear, electronics, etc. are some of the industries that import a lot of raw materials from China. Therefore, if the stock of goods is depleted, businesses may have difficulty in production and business.

For example, the very “hot” item is medical masks. The most important raw materials such as antibacterial filter cloth and activated carbon, which are not currently produced domestically, are often imported from China, but China’s restrictions on the export of equipment and raw materials have put the production of masks at risk of a shortage of raw materials. Many businesses are struggling to find sources of goods from other countries, but it is not easy.

Big risk

Data from the General Department of Customs shows that exports and imports to China account for a large proportion of Vietnam's trade structure.

In 2019, Vietnam's exports reached more than 264 billion USD, of which over 41 billion USD went to China, second only to exports to the US market (more than 61 billion USD). Regarding agricultural products, China was still Vietnam's largest import market in 2019 with 5.92 billion USD, although it decreased by 7.4% compared to 2018 (due to the impact of the US-China trade war).

A closer look at the goods Vietnam imports from China will reveal a very large level of interaction. According to the General Department of Customs, in 2019 Vietnam imported more than 253 billion USD, of which more than 75 billion USD came from China.

Especially with input materials for Vietnam's industries, for example, imported machinery, equipment, tools, and spare parts in 2019 originating from China ranked No. 1 with an import turnover of 14.9 billion USD, an increase of 28%.

The group of textile, garment, leather and footwear raw materials and accessories (including cotton, textile fibers, fabrics of all kinds, textile, garment, leather and footwear raw materials and accessories) imported to Vietnam in 2019 mainly originated from China with a value of 11.52 billion USD.

Vietnam also imported raw plastic materials and products in 2019 mainly from China, with a turnover of 3.99 billion USD, up 25.1% compared to 2018.

In 2019, China and South Korea remained the two main markets supplying phones of all kinds and components to Vietnam with a total value of 13.5 billion USD, accounting for 92.4% of the total import value of this group of goods. Of which, from China was 7.58 billion USD.

In 2019, China continued to be the largest market supplying iron and steel of all kinds; chemicals and products to Vietnam...

Currently, Vietnam has signed 13 free trade agreements to expand its trade market. However, taking advantage of the opportunities from these agreements has not been as expected. Vietnam's trading partners are still "familiar faces" such as China, the US, Japan, some EU countries, etc. Access to new markets, despite efforts to promote, is still in the "potential" form.

The heavy dependence on the Chinese market shows that industries will be very vulnerable when this economy "sneezes and has a runny nose". The acute pneumonia epidemic caused by the Corona virus as analyzed above is an example.