Trade between China and Vietnam brisk

Trade between China and Vietnam brisk

Where is the vibrant border trade between China and Vietnam
heading? Liu Zhi sheds some light on the issue.

The two southern Chinese provinces of Yunnan and Guangxi
border six provinces of Vietnam. The length of this entire Sino-
Vietnamese land border is 2,373 km. On both sides of this
frontier are communities who have the same ethnic origin,
language and customs. Their historically close relations go back
a long way, and contacts between these trans-border communities
have never really stopped despite war or hostile bilateral
relations between the two countries.

The present governments of both China and Vietnam started
promoting this trans-border trade by signing their first
agreement in 1953 and since then economic exchanges have been
steadily promoted until military hostilities between both
countries in 1979 made cross-border communications difficult.
From that year, frontier markets were closed and the once
prosperous trading posts became desolate. However, owing to the
close informal relationship between trans-border communities, a
form of secret trade went on.

At first it took the form of relatives living on either side
exchanging their goods at appointed spots. Gradually as the
hostility lessened, these secret informal points became regular
markets for exchanging goods. They were called "Sod Markets" or
"Dew Markets" for the trade was usually underway on the sod
before sunrise. As the security situation on the frontiers became
normalized, China opened more than 30 trading posts along the
frontier and cross-border traffic became increasingly free.

This frontier trade has developed rapidly since the mid-1980s.
According to Chinese statistics, the annual total volume of Sino-
Vietnamese frontier trade during 1988-1990 was 450 million yuan,
800 million yuan and 2,370 million yuan respectively. Clearly, it
was a situation where trade was doubling every year. Over the
next three years, 1991-1993, the growth was less dramatic and the
annual average volume was about 2,800 million yuan (about US $300
million).

The early years of the 1990s marked the beginning of official
efforts to re-open old transport lines. For instance, Guangxi's
Sino-Vietnamese Friendship Pass Railway Bridge, and Yunnan's
Sino-Vietnamese Friendship Bridge were opened in 1991 and 1992
respectively. However, the railway link between Yunnan and
Vietnam has been more difficult to resume.

The main exports of China along this border are hardware,
diesel engines, cement, steel, bicycles, sewing-machines,
textiles, daily necessities and medicine, while those from
Vietnam are agricultural products, coal, cotton, yarn, rubber,
grain, herbs and fruit. The methods of payment are varied.
Chinese currency has been habitually accepted as the currency for
settling accounts although barter is also practiced. Nowadays,
the yuan, U.S. dollar and dong are freely exchanged along the
border. Trading is usually by the "cash on delivery" method but a
more sophisticated trading environment is emerging with the
introduction of different kinds of credit.

The participants in this growing market are also getting more
varied. No longer is trading only done by border inhabitants on
an individual basis; trade has drawn to this border the state-
owned companies, the collectives and the private enterprises of
both countries. These firms are no longer just those belonging to
counties along the border but also companies from the inner
provinces on both sides. However, the bulk of the trade is done
by private enterprises, accounting for up to 70 to 80 per cent of
the total trading volume. Frontier tourism and economic-
technological cooperation have also come into being.

The development of Sino-Vietnamese frontier trade has brought
along the development of industry and the construction of trading
towns on both sides of the border. Frontier areas, as they become
more prosperous from these bustling economic activities, also
become socio-economically more stabilized.

The factors that have contributed to the growing border trade
have been the geographical proximity of market places; similar
political-cultural background on either side; and the
complementary commodities and industrial needs of China and
Vietnam. Since the normalization of relations between both
countries in November 1991, there have also been a series of
agreements to promote economic cooperation which have provided
the legal basis for the frontier trade and there is room for more
growth.

However, there are also factors which have or will hamper the
growth of this trans-border commerce. First, although the Sino-
Vietnamese relationship has been normalized, age-old suspicions
plus unresolved territorial disputes on land and at sea still
exist. As a result, Sino-Vietnamese relations have had its ups
and downs. Recent examples would include the incident in 1992
when Vietnam protested after China granted a U.S. oil company
prospecting rights in the South China Sea.

At the same time, Vietnam also closed some frontier trading
posts and banned the import of 17 kinds of Chinese goods. Vietnam
has also complained that the smuggling along the border causes it
to lose vast sums of revenue from taxes. At the same time,
imports from China have also put tremendous pressure on Vietnam's
own light industries.

The second factor that might restrict the growth of border
trade is the availability of other sources of goods to the
Vietnamese. As Vietnam has opened up its economy, the Asian NIEs
and some Western countries have been actively seeking to make
inroads into the Vietnamese market.

The third restricting factor is the lack of physical and
bureaucratic infrastructure along the border to handle trade
properly. This is in terms of communication facilities as well as
banking and other institutional conditions to settle trading
accounts properly.

Unless all the challenges and competition are addressed, Sino-
Vietnamese frontier trade may not go very far beyond its present
level.

Liu Zhi is an Associate Research Fellow with the Institute of
Southeast Asia Studies in Yunnan, China.