Xi visits Vietnam this week, following Biden’s journey in September

Xi introduced lots of financial carrots with him for his first journey to China’s southern neighbor since 2017. Throughout his go to on Tuesday and Wednesday, the 2 international locations signed 36 cooperation pacts, together with potential investments in infrastructure sectors like railways and telecoms. Xinhua, a Chinese language state media outlet, proclaimed that Vietnam and China had been constructing a group with a “shared future.”

“[Vietnam] can learn a lot from China in terms of development. They have a lot of experience in providing development solutions, from urbanization, metro system development, to highway construction,” mentioned Vu Minh Khuong, an affiliate professor on the Lee Kuan Yew College of Public Coverage on the Nationwide College of Singapore.

Biden went to Vietnam bearing items too. In the course of the U.S.’s president’s go to in September, Hanoi secured deals on important sectors like semiconductors and minerals, and the 2 governments upgraded their relationship to that of “comprehensive strategic partners,” the best in Vietnam’s diplomatic rating. 

As U.S.-China tensions warmth up, there’s growing stress on governments of smaller international locations to decide on one facet or the opposite. Simply final week, the U.S. pressured the Emirati AI firm G42, a logo of the Center Japanese nation’s tech ambitions, to desert its ties with Chinese language tech firms. 

But Vietnam—for now, a minimum of—has been in a position to work with each Washington and Beijing with out drawing the ire of both. Each powers try to courtroom Vietnam with funding, partnerships, and different advantages, and making some extent of visiting the Southeast Asian nation. 

Specialists say that’s because of Vietnam’s place within the area as an “independent actor” that may work with each Washington and Beijing, whereas its rising economic system encourages overseas firms to take a position.  

Vietnam has benefited from Western companies attempting to “de-risk” from China. Electronics companies that make merchandise for Apple and Google have shifted some manufacturing to Vietnam to diversify their provide chains, keep away from anti-China tariffs, and reap the benefits of the Southeast Asian nation’s cheaper labor. Vietnam exported $371 billion price of products in 2022, up from $243 billion in 2018, the yr the Trump administration began its commerce warfare with China.

Vietnam is, maybe surprisingly, distinctive in its openness to firms in search of a China different. “If you look at the diversification out of China, where [else] can you go?” Trinh Nguyen, a senior economist overlaying rising markets at Natixis, says. “The Southeast Asia story is that not many countries actually want this [derisking business from China]. If you look at Indonesia, it actually wants to position itself in the electric vehicle supply chain and the Philippines is all about building its own infrastructure.”

Minh Hoang/Pool—AFP through Getty Pictures

However Vu additionally credit Vietnam’s latest financial success to the nation’s politics. Vietnam’s basic secretary Nguyen Phu Trong has pursued what observers have dubbed “bamboo diplomacy” which takes its cue from the plant’s sturdiness and suppleness.

Vietnam’s goal is to develop by itself phrases. “Vietnam is unique in that it is seen to be an independent actor with its own interest,” Nguyen mentioned. The U.S., for its half, desires to assist Vietnam as a potential method to assist include China, she suggests, whereas Vu provides that deeper relations with the U.S. can even permit Vietnam to learn from “friend-shoring.”

But it surely’s not solely about superpower relations. “I don’t think it’s a game of benefitting from U.S.-China tensions,” Vu says, declaring that Vietnam is speaking to different main economies. Simply final month, Vietnam established a complete strategic partnership with Japan, following an analogous settlement with South Korea last December. The Vietnamese prime minister is visiting Japan over the weekend in an indication of selling nearer relations.

Vietnam ranked second amongst potential medium-term funding locations in a survey of Japanese producers from the Japan Financial institution for Worldwide Cooperation, forward of China in third place. South Korean firms like LG and Samsung are additionally investing closely in Vietnam. 

Chinese language buyers want to seek out new markets amid a slowing economic system at residence, notes Nguyen. Vietnam is effective each as a market in itself, and as a possible base to export world wide. China could also be nearer to some international locations in Southeast Asia—specifically, Cambodia and Myanmar—but Vietnam affords stability and a extra open enterprise surroundings. 

China’s exports to Vietnam have been rising steadily ever because the begin of the U.S.-China commerce warfare. The 2 international locations’ provide chains are more and more linked, particularly as Chinese language firms start exporting extra parts to Vietnam for additional meeting. Round 70% of China-Vietnam trade to this point this yr regards the import and export of intermediate items. 

And Vietnam is an efficient base for Chinese language firms to contemplate going international. It has a free commerce settlement with the European Union, agreed in 2019. “Only two ASEAN countries have that at the moment: Vietnam and Singapore,” Nguyen mentioned. “Vietnam also has a lot of market access. It’s not under tariffs and other sanctions that the U.S. imposed.”