China to overtake US as Vietnam's largest importer: HSBC

 The trade outlook for Vietnam is very encouraging, aided by comparatively low wages and its proximity to fast growing Asian economies. Photo: Luu Quang Pho

Vietnam’s geographical location in Asia, with good access to India, China and South East Asia, leaves it well-placed to trade with fast-growing neighbors, according to a forecast by UK-based bank HSBC.

Vietnam’s fastest-growing export destinations in the decade to 2030 will be China, India and Malaysia, HSBC said in its Global Connections report, which was released this week.

It expected Vietnam's exports to all these markets to grow by at least 14 percent per year.

HSBC's forecasts echoed the recent Doing Business report by the World Bank, which ranks Vietnam 75th out of 189 economies on the ease of trading across borders, well ahead of both China and India.

The ranking reflecting Vietnam's role as a regional trading hub and its efforts to dismantle barriers to free trade.

Although the US was still Vietnam’s largest export market in 2013, the HSBC report forecast that China will overtake it to become Vietnam’s largest export destination by 2030.

Vietnam’s location and strong foothold in both clothing and telecoms means it is well-placed to access this buoyant consumer market.

Trans-Pacific Partnership 

Yet the US and Vietnam will still enjoy historically strong commercial linkages, and by 2030 the US will still account for 15 percent of Vietnam’s exports, according to HSBC.

Vietnam and the United States are two of the 12 countries currently negotiating the Trans-Pacific Partnership (TPP). When the agreement is finalized, Vietnam’s exports will become even more competitive in the US, probably boosting trade between the two countries, the report said.

Trade deals with ASEAN, the United States and Europe in the next few years will secure market access for the new range of higher-value exports and help to keep import costs down.

“Against this background, we are projecting robust growth in real GDP of more than 5 percent per annum to be sustained in the decade to 2030,” said the report.

However, the country's economic outlook is also facing risks posed by the "ruling party resistance to structural reforms, setbacks to infrastructure investment, possible delays to the new trade pacts, as well as slower Chinese growth.

Top exports

Clothing and apparel are expected to remain the country’s top export for the foreseeable future, contributing almost 20 percent of the projected growth in total merchandise exports in the decade to 2030.

Behind clothing and apparel, electronics will make the second largest contribution to Vietnam’s export growth from 2015 to 2030, it said.

Regarding import, HSBC said it expected industrial machinery to continue to be Vietnam’s largest import sector out to 2030, contributing around a quarter of Vietnam’s import growth over the forecast period.”

The next two most important import sectors will be textiles and wood manufactures, and information and communication technology equipment, supporting Vietnam’s export base in these sectors.

China and South Korea, emerging Asia’s two leading export nations over the last decade, will continue to be Vietnam’s largest import partners out to 2030.