A Huge Partner China's entry into the World Trade Organization (WTO) has created favorable conditions for Vietnam's trade with this huge market. However, the Vietnamese Government and businesses should work out a particular strategy for doing business with this 1.2-billion strong market. By Thai Thanh US$5 billion over the next five years. According to Dao Ngoc Vinh, vice director of the Asia-Pacific Department of the Ministry of Trade, Vietnam-China trade has made astounding progress since 1991. The two countries have signed more than 20 agreements which have provided a fundamental legal corridor for trade relations such as agreements on trade, border trade, economic cooperation, payment, and overland, air and railway transport. Last year, two-way trade reached a record high with US$2.5 billion, up 87.1% from 1999. China has become Vietnam's fourth largest trading partner after Japan, Singapore and Taiwan. Vinh attributes the increasing trade to the determination to boost bilateral trade and economic relations by top leaders of the two countries, and Vietnam's policies encouraging export to China. The two countries have decided to increase bilateral trade to US$5 billion in the 2001-2005 period. A multi-level market. Ho Quoc Phi, Vietnamese trade counselor in Beijing, says China is an easy market. This is both an advantage and a shortcoming for Vietnamese goods. In a report on ten years' trade with China, Dao Ngoc Vinh remarks that the quality of goods exchanged between Vietnam and China does not reflect truly the strength and economic development of each country. In border trade, counterfeit and inferior goods make up a large volume, creating a negative impact on consumers. Vinh points out that the fundamental advantage which Vietnam can enjoy when China enters the WTO is its commitment to offering the most favored nation status to non-WTO ASEAN countries. "China has also pledged to open its market to a number of commodities. This will cause no problems for Vietnam in terms of trade policy. Trade methods do not have to change much. What Vietnam should do is enhance its competitiveness," Vinh noted. Vietnam considers China a strategic market in its export strategy for the next five years. China-Vietnam trade last year reached US$2.47 billion. According to the Ministry of Trade, China has become Vietnam's fourth largest trading partner after Japan with US$4.87 billion, Singapore US$3.65 billion and Taiwan US$2.56 billion. Vietnam-China trade (Unit: US$million)   Year Turnover  China's export China's import 1991  30 20  10 1992 180 110 70 1993 400 280 120 1994 5 30 340 190 1995  1,050 720 330 1996 1,150 840 310 1997 1,440 1,080 360 1998 1,245  1,028  217 1999 1,318 964 354 2000 2,466  1,537 929 By Sep. 2001 2,137  1,263  874 (Source: Chinese customs)

What to Sell to China?
Ho Quoc Phi, Vietnamese trade counselor in Beijing, advises what Vietnamese businesses should export to China
By Vu Thu
China needs a wide range of Vietnamese goods. Following are the common commodities:
Crude oil: Crude oil can fetch higher prices in China as the transport cost can be reduced. Demand for oil import from Vietnam is unlimited, which can reach as high as 10 million tons a year.
Natural rubber: China needed 1.5 million tons of rubber in 2000, of which 0.6-0.7 million tons was met by domestic supply. Its rubber demand increases 10-15% annually.
Thailand, Vietnam, Malaysia and Taiwan are main suppliers of natural and synthetic rubber for China. Thailand supplies 580,000 tons annually, Taiwan 400,000 tons, mainly synthetic rubber, Malaysia 150,000 tons and Vietnam 70,000 tons. According to Vietnamese customs, Vietnam exports 100,000 tons to China. Vietnam General Rubber Company says China is always Vietnam's prime rubber market, accounting for 50% of production and 65% of export volume. However, low quality may be the reason for Vietnamese rubber's humble market in China. Vietnamese rubber is produced mainly by the SVR, the standard of the former Soviet Union, while Thai, Malaysian and Taiwanese rubber follows the U.S. standard ISS.
Vietnamese rubber has higher prices than those produced in regional countries because it enjoys a 50% reduction of import tax and value-added tax for trade via borders.
Vegetables and fruit: Vietnam exports a large quantity of vegetables and fruit to China and the products are available in most major Chinese cities.
However, China can now grow most of the tropical fruit and vegetables that Vietnam enjoys monopoly such as longans, litchis, dragon fruit, bananas and water melons. Chinese scientists are able to hybridize off-season fruit. This may pose a problem for Vietnamese fruit and vegetable export in the future.
Aqua products: These are favorite products in China where quarantine and inspection are not so strict. It should be noted that although Chinese customs have announced a rapid increase in aqua product export turnover, estimated at US$2.3 billion in 2000, the import turnover is nearly unavailable. The import turnover from Vietnam is put at zero.
Agro-products: China is a competitor with Vietnam in agro-product export. However, some Vietnamese agro-products can still find their ways to China.
- Cashew nuts: China is Vietnam's main market for cashew nuts, but recently Indian cashew nuts have also been exported to this market.
- Rice: Vietnam can take the opportunity to sell rice to the southern and southwestern regions of China because China has cut the farming acreage and suffered crop losses continuously. Vietnam should persuade China to substitute Vietnamese rice in its rice purchasing contracts or rice aid projects. China currently imports 200,000 tons of fragrant rice from Thailand.
Recently, China has also bought Vietnamese sugar, coffee and pepper.
Coal: China is a large coal exporter but it also imports coal from Vietnam because its coal mines are located mainly in the northeastern region; therefore coal transport to the south is costly and it is more economical to buy Vietnamese coal.
Some Vietnamese industrial products such as picture tubes, detergent, perfume, confectionery and footwear are also accepted by Chinese consumers. China has high demand for wooden furniture, especially wooden antique imitations.

China's imports from Vietnam
(Unit: US$ million)
 

Commodity	1996	1997	1998	1999	2000
Steel	7.107	6.518	6.287	7.008	8.536
Chemical fertilizer	3.563	2.995	2.506	2.248	1.730
Electro-mechanical products	61.351	59.344	64.010	77.601	102.871
Machine tools	2.522	1.586	1.391	1.506	1.890
Crude oil	3.407	5.456	3.275	4.641	14.861
Sewing machines	2.127	2.576	2.603	2.317	1.629
Oil products	2.385	3.682	2.407	2.698	3.657
Cereals	2.575	916	716	524	594
Plastic grain	1.582	1.769	1.628	1.632	2.599
Cardboard	2.328	2.825	3.023	3.368	3.296
Iron deposits	1.321	1.615	1.468	1.379	1.857
Vegetable oil	1.493	1.505	1.299	1.074	627

(Source: Vietnamese trade counselor in China)

A Springboard to Expand Trade
Biti's, a footwear producer in HCM City, is planning to build a commercial center in the Lao Cai border economic zone. Once in operation, this commercial center will help increase the company's export to China.
By Duc Hoang
Biti's has been exporting its products to China for six years. To date, the company has established more than 100 outlets there, which are expected to bring an export turnover of about VND20 billion in 2001.
According to Nguyen Duy Thanh, director of Biti's Local Sales and Border Trade Center, Lao Cai authorities have recently adjusted the planning for the border gate economic complex and decided to select Biti's as the investor of a commercial center in this zone. The total cost for building the Lao Cai border gate economic zone is about VND136 billion, including some VND70 billion for the commercial center. Thanh says the provincial authorities want to invite other local companies to Biti's to take part in this project.
Lao Cai leaders want the commercial center to become a place for local companies to open their transaction branches where they introduce and gather goods before transporting them to the Chinese market.
The commercial center will be built on a 4,500 square meter plot, about 600m from the border; it will have 11-story and 17-story buildings surrounded by a four-story building that is used for storing, displaying and selling goods. Presently, the project site is a residential area.
As the project owner, Biti's will develop activities to promote trade, tourism, and cooperate with local exporters to further boost the export of Vietnamese goods to the Chinese market. "We are both an investor and a bridge between businesses in HCM City with Lao Cai Province," Thanh says.
Referring to the benefits of building the commercial center, Thanh says Vietnamese businesses should have a place for dealing with their clients when they want to sell goods in border markets. "According to our experience, a clear address and transaction office will help companies win the clients' trust and prove their long-term business," Thanh remarks, adding that branch offices at border gates not only serve commercial transactions but also support marketing for expanding export markets.
According to Thanh, China's border commercial center is fairly busy and has many facilities to serve trade while Vietnam has almost nothing. That is the reason for building an international border gate commercial center.
Border trade between Vietnam and China often takes place at the Mong Cai border gate in Quang Ninh Province. Biti's has good reason for choosing to build a commercial center at the Lao Cai border gate. Lao Cai borders Yunnan, a Chinese province with a population of 42 million with Kunming as its headquarters. Biti's realizes that the taste and consumer practices of people in Yunnan are similar to those of the Vietnamese. "In fact, Biti's also has a branch in Mong Cai but its trade here is worse than in Lao Cai, so we have decided to concentrate on this border gate area," Thanh explains.
Yunnan could be the gateway for Vietnamese goods into western China. Therefore, this is a very promising market for Biti's. Thanh says, "In the near future, when construction of the Haiphong-Kunming rail road is completed, the transport of goods through the border will be more convenient."
According to Thanh, Biti's plans to submit the blue prints of the commercial center to Lao Cai authorities in the second quarter of 2002.

A Big Tourism Market
The countries in the Asia-Pacific region, Vietnam included, all target China as a prospective tourism market. However, it is not so easy for Vietnam to attract some 600,000 Chinese tourists to the country annually.
By Vinh Tran
According to a report from the Yunnan Tourism Association (YTA), 70,000-80,000 Yunnan people (of the total population of 42 million of the province) take outbound trips every year, mostly to Southeast Asian countries such as Thailand, Malaysia and Singapore. The number of Yunnan visitors to Vietnam was a mere 4,500 in 2000, and the number of Vietnamese guests visiting Yunnan by train was just 2,000.
Le Dai Tam, director of the Hanoi branch of Vietnamtourism, says one of the reason for the increase of Chinese visitors coming to Vietnam by airplane is the slow passport granting in Yunnan as the guidelines have not been implemented in all localities of the province. YTA members say the obsolete railroad network from Yunnan to Lang Son, the northernmost province of Vietnam, which was built long ago following an ancient French technology, disappoints most travelers. But the main reason voiced by the Chinese partners is Vietnam's entry permit fee. Luu Thuong Vu, chairman of YTA, says the cost of US$50 (approximately 400 reminbi) is too high and unfair for Chinese citizens touring Vietnam with their passports. Moreover, the fact that there is no consulate agency in Yunnan while the Vietnamese Embassy in Beijing is too far has caused difficulties in time and money for Chinese travel agencies wanting to open tours to Vietnam.
Truong Bao Quy, deputy head of the Yunnan Tourism Administration, says service fees in Vietnam are many times higher for Chinese tourists. "On a same tour, why do local visitors have to pay less than foreign visitors do? And why do visitors traveling by train receive less incentives than those traveling by airplane?" Quy wonders. It is worth noting that Chinese visitors to Ha Long Bay and Cat Ba Island spend only 35 reminbi a person on average; the corresponding figure is 200-300 reminbi in Thailand, as cited by Chen Chu Hui, director general of the Yunnan Travel Agency. Chinese travel agencies also complain about the similarity in tourist products.
A recent survey of the average expenditure of foreign tourists in Thailand, conducted by the Tourism Administration of Thailand (TAT), indicates that the most generous spenders are Japanese and Chinese guests. A Japanese visitor spends some US$47 a day while a "real" Chinese visitor spends US$56 daily in Bangkok. The "real" Chinese tourists that TAT is aiming at are those who come from the northern part of China such as Beijing and Shanghai.
Chinese tourists accounted for half of the international visitors to Vietnam over the past few years. In a bid to tap this potential market, Vietnam Airlines opened the Hanoi-Beijing route two months ago, so far attaining an average occupancy rate of 50%. The Hanoi-Kunming route has also been opened with three flights a week. The Vietnamese tourism sector has also attended CITM '2001, an international tourism fair in Kunming.
All these efforts have opened new prospects for the tourism sectors of the two countries. With proper policies, the Vietnam tourism sector will achieve its set target as Chinese tourists will choose Vietnam, the 15th destination, as their second homeland.

Know More about China
Belonging to the first generation of Vietnamese students to study in China and having returned there many times for work, Deputy Prime Minister Nguyen Cong Tan knows a lot about the country. Following are some of his opinions about this market.
By Thai Thanh
"The whole world predicts China's admission to the World Trade Organization (WTO) would cause fluctuations for the world's economic, trade and investment situation. However, I just want to talk about the agricultural influence.
China is an agricultural power and has some of the world's top agro-products. In addition, China is also an import power. China imports nearly US$30 billion worth of agro-products annually and Hong Kong imports about US$15 billion. In the meantime, Vietnam exports only US$4.3 billion worth of agricultural, forest and aquatic products.
Joining the WTO, China will have to open its market (and so will Vietnam). We will have to find China's strong agro-products with which we cannot compete in order to avoid wasteful investment.
In my opinion, these items include temperate fruits like apples, pears and grapes. We should not invest big money in growing these fruits.
Another strong commodity in China is cotton. Chinese cotton has a very high output; it has lower prices and higher quality compared with domestic cotton. Chinese cotton yields more than three tons of seeds per hectare while ours is under one ton per hectare. Even our textile industry likes to import Chinese cotton because of cheaper prices. China is also the world's leading producer of silk. China can create great breeds of silkworm. Will the Vietnamese silk industry be able to stand firm?
Another traditional commodity in China is pharmaceutical materials, which have the No. 1 position on the global market. When we open our market, it will be flooded with Chinese pharmaceutical materials. I think we should not spend much time producing these four items and have to make careful calculations so that we can both avoid being wasteful and be able to increase our competitiveness.
In fact, China also produces agro-products which are our specialties but their prices are higher, so we have an advantage and should not be afraid of the competition. These are rice, rubber, coffee, pepper, cashew nuts, tea, rambutans, durians, star apples, and aquatics. All of these are more expensive in China than in Vietnam.
China currently has a gross domestic product (GDP) of over US$1 trillion; this figure doubles every 10 years. Chinese people will have greater demand for goods, and this will be a big export chance for the Vietnamese agriculture. The matter is whether our products are able to compete with products of other ASEAN countries on the Chinese market.
We have one weakness: we border China but do not conduct large-scale research in the country; there is a great deal of information about the market, business practices, and businesses of China but we are neglectful of the research. Over the past 10 years fewer people have studied Chinese, China hasn't been researched, and not much information is exchanged between the two countries. Therefore, we do not have many people with profound knowledge of China's economy and businesses, and have not been able to establish trade relations with Chinese partners. We have just sold goods to the southern provinces of China yet no one understands the northern provinces. I think we must establish a team of experts on the Chinese market because this country's economy is still developing and will become an important part of the world's economy. In addition, we have not yet created characteristic Vietnamese commodities which can be remembered by the Chinese. So far, the Chinese just know Ben Tre coconut candies, Hai Duong green bean cakes and Phu Quoc fish sauce. We must build a commercial agriculture with many trademarks in order to penetrate this market.
I hope that we can seize just 10% of the value of Chinese agricultural products."

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