COURSE PROJECT WORKBOOK
INTERNATIONAL FINANCE

Topic :
The impact of the US-China trade war on FDI
in Vietnam
Instructor : Trần Minh Tú
Group members :
No.

Name of members

Student ID

Tasks

% of
contribution
100%

1

Mã Thanh Phong

185080596

Task I + II

2

Nguyễn Hồng Bảo

Ngọc

185081102

Support I + II +
Powerpoint

100%

3

Dương Thanh Thảo

185080850

Support III + IV +
Powerpoint

100%

4

Hồ Ngọc Thúy Duy

185080250

Task III + IV

100%


5

Phạm Trúc Ly

185080651

Task V

100%

6

Lê Yến Nhi

185081180

Support V+Word

100%


Table of Contents
TABLE OF CONTENTS..................................................................................................................2
THE IMPACT OF THE US-CHINA TRADE WAR ON FDI IN VIETNAM..............................................1
I - THE BEGINNING.....................................................................................................................1
1. REASON FOR CHOOSING THE TOPIC
2. OBJECTIVE OF CHOOSING THE TOPIC
3. RESEARCH OBJECT AND SCOPE
4. RESEARCH METHODOLOGY


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1
2
2

II- FDI.........................................................................................................................................2
1.WHAT IS FDI ?
2. THE NATURE OF FDI
3. FEATURES OF FDI
4. TYPES OF FDI INVESTMENT THAT BUSINESSES OFTEN CHOOSE TO INVEST IN VIETNAM
4.1 HORIZONTAL FDI
4.2 PLATFORM FDI
4.3 VERTICAL FDI
4.4 CAUSES OF THE US-CHINA TRADE WAR
5. FACTORS AFFECTING FDI ATTRACTION
5.1 POLICIES
5.2 INVESTMENT LAW
5.3 OTHER INFLUENCING FACTORS

2
2
3
3
3
3
3
4
6
6
6

6

III- FDI INTO VIETNAM BEFORE THE US-CHINA TRADE WAR.......................................................7
1. POSITIVE SIDE
2. THE NEGATIVE SIDE

7
8

IV- VIETNAM'S FDI IN THE MIDST OF THE US-CHINA TRADE WAR...............................................8
1. POSITIVE IMPACT
2. NEGATIVE IMPACT:

9
12

V-CONCLUDE AND SOLUTIONS.................................................................................................13


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The impact of the US-China trade war on FDI in Vietnam
I - The Beginning
1. Reason for choosing the topic
The process of globalization and economic integration is becoming more and
more widespread, has strongly affected all countries, especially developing countries.
International economic integration not only affects economic growth and development,
but also strongly impacts many fields including international investment and investmentrelated fields. Any country that wants to industrialize and modernize needs to have
investment capital to invest in the production and business process, building
infrastructure, upgrading equipment, building and developing a team. … But where and

how capital is created depends greatly on the policies of each country. Among them, FDI
capital can play a great role in building social infrastructure, economic development,
promoting economic restructuring, creating jobs for millions of workers. , improve
people's living standards. Because of this, FDI is increasingly important in the current
situation of our country. Recognizing the importance of capital (FDI), the Vietnamese
government has had many strategies and policies to systematically attract this investment
capital into the economy. Especially in the wake of the trade war between the two great
powers. The US-China economy is escalating. The trade war reduces the global economic
growth, especially that of the two main countries, the US and China (two major trading
partners of Vietnam), thereby reducing demand for Vietnam's exports. and has the big
effect to the lines capital FDI to Vietnam. That's why our team chose the topic "IMPACT
OF THE US TRADING WAR - CHINA ON FDI INTO VIETNAM".
2. Objective of choosing the topic
The US and China are the two leading economies in the world that dominate
global trade and are also the two leading trade partners of Vietnam today. Therefore, the
US-China trade relationship has a very strong impact. to trade in particular , the economy
of Vietnam in general . Therefore, when the trade war between the first two major
economic powers (the US) and the second (China) in the world has not shown any signs
of cooling down, tensions seem to be escalating. The conflict between these two largest
economies in the world has affected the entire world economy, reducing the growth rate
of countries during the past 4 years and showing no signs of cooling down. Particularly in
Vietnam, it is also significantly affected by the trade war between the two, so this huge
economy. Direct and indirect impacts on Vietnam's developing economy with both
positive and negative impacts. These things have caused the Vietnamese government to
give develop appropriate strategies and policies to prevent negative impacts on Vietnam's
economy, thereby bringing more positive impacts to Vietnam's rise. One of the top and
urgent priorities of the government today is to attract FDI into Vietnam to develop the
economy. FDI capital is one of the important factors to build and strengthen Vietnam's
economy. And to know the impact that FDI brings to Vietnam's economy in the giant war
between the two great powers. Therefore, we chose the topic "IMPACT OF THE US

TRADE WAR _ CENTRAL ON FDI INTO VIETNAM". Thereby, let's try to understand
whether the application of these policies and strategies in the big war is really suitable for
the Vietnamese economy? From there, analyze the operation of these FDI sources, also


2

from that experience, propose solutions to improve the efficiency of attracting investment
capital into Vietnam, bringing positive impacts to the economy.
3. Research object and scope
The first object of the essay's research is how the huge influx of FDI affects
Vietnam during the ongoing global trade war. Specifically, the negative and positive
impacts of FDI in the construction and development of Vietnam's economy can be
mentioned in different periods. Research scope: the current state of FDI for the economic
growth development of Vietnam. FDI capital options are suitable for Vietnam's economic
development.
4. Research Methodology
* Methods of data collection :
· Collect primary data from mass media
· Collecting secondary data provided by Accounting Department and Sales Department
* Methods of data analysis : Use statistical methods to collect descriptive analysis
of data collected from sources. From that financial analysis and offer the most
suitable solutions.
II- FDI
1.What is FDI ?
FDI (Foreign Direct Investment) is a form of long-term investment by an
individual or organization from one country to another by setting up factories and
business establishments. The main purpose is to achieve long-term benefits and take
control of this property.
To explain in more detail what an FDI project is, the World Trade Organization

has defined: Foreign Direct Investment (FDI) will occur when an investor from a country
acquires an asset. in another country (which is an attractive country for investment) with
the right to manage the assets. The regulatory aspect is what differentiates FDI from other
financial instruments.
In most cases, both the investor and the assets he or she manages abroad will be
the basis for doing business. In such cases, the investor is often referred to as the parent
company (or main company) and the assets are referred to as a subsidiary or branch of the
company.
2. The nature of FDI
Although FDI appeared several decades later than other external economic
activities, FDI has rapidly grown and established its position in international relations.
What is the nature of an FDI project? The essence of FDI is the meeting of the needs of
two parties and one side is the investor and the other side is the host country. Which
includes:
There are established rights and obligations of the investor to the place of
investment.
For invested capital and established ownership as well as management rights.
Accompanying that is the right to transfer technology and techniques of the


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investor to the native countries.
There is a link to the market expansion of multinational enterprises, companies
and organizations.
Always associated with the development of international financial markets and
international trade.
3. Features of FDI
What are the characteristics of FDI companies? FDI is a feasible form with great
economic efficiency. Therefore, the primary purpose of FDI is to bring profits to

investors. The income that the investor earns is business income, not interest. Therefore,
this type of income depends entirely on the business results of the enterprise.
If you want to attract investment and promote economic development, the
invested countries need to have a clear legal corridor. What are investors' rights to FDI
companies? They have the right to decide on their own investment and business decisions
and are responsible for their own profit and loss. At the same time, they are also free to
choose according to the field of investment, investment form... So they can make the
most suitable decisions that bring high profits.
4. Types of FDI investment that businesses often choose to invest in Vietnam
4.1 Horizontal FDI
Horizontal FDI is also known as a form of horizontal investment. Horizontal FDI
is generated when a company/enterprise doubles its operations in the host country at the
same stage of the value chain in a host country through FDI.
4.2 Platform FDI
Platform investment form FDI is also known as a form of foundation investment.
The FDI platform makes direct investment abroad from a source country into a
destination country for the purpose of exporting to a third country.
4.3 Vertical FDI
Vertical FDI is also known as a vertical form of investment. Vertical FDI is the
form that occurs when a firm through FDI moves upstream or downstream in different
value chains, i.e. when firms carry out value-adding activities on a one-to-one basis.
longitudinal phase in the host country. Government investment promotion agencies
(IPAs) are using various marketing business strategies inspired by the private sector to try
and attract foreign investment, including the marketing of diaspora to attract investment
in any form from foreign investors.
In addition, countries will have different forms of incentives to stimulate the
investment of the host countries by some forms of incentives for outward direct
investment, which may take the form of:
Low corporate tax and personal income tax rates.
Tax season



4

Other types of tax concessions
Preferential tariff
Special Economic Zone
EPZ - Export Processing Zone
Bonded
Maquiladoras
Investment financial support
Free land or subsidized land
Relocation and Deportation
Infrastructure subsidies
R&D Support
Energy brings
Offense from regulations (usually for very large projects)
By excluding internal investment to get downstream profits.
4.4 Causes of The Us-China Trade War
Since becoming US President in January 2017, Mr. Donald Trump has threatened
many times to take strong measures to repay what China has done to the US in the field
of trade. Since Donald Trump took office, the two countries have repeatedly negotiated to
come up with a suitable agreement and concessions, but without success.
Root causes
The US-China trade war is an increasingly fierce conflict between the two largest
economic powers in the world. It is forecasted that by 2030, China's nominal GDP will
surpass that of the US. However, in terms of purchasing power parity (PPP), China's GDP
now exceeds that of the US. The US and China are also two trading powers: the US is the
world's second-largest importer and second exporter; China is the world's largest exporter
and second-largest importer

In recent years, the competition between the two superpowers has become increasingly
fierce in the context of the US showing signs of decline. Meanwhile, China is expressing
its ambition to replace the US as the world’s number one power and dominate the world’s
cadastral chessboard.
Specific cause
First, the US trade deficit with China has continuously increased sharply.
The US trade deficit is considered a direct cause of US-China trade tensions. In 2017, the
US imported $506 billion worth of goods from China, while exporting only $131 billion
worth of goods to China. Thus, the US trade deficit with China is up to 375 billion USD.
Therefore, to achieve a trade balance with China, the Trump administration has imposed
import taxes on goods from China, putting pressure on China to increase purchases of US
goods. Thereby reducing the trade deficit. In addition, the tax will make goods made in


5

China imported to the US will lose their competitive advantage in price, forcing
multinational companies that are placing most of their production plants in China to see
Consider relocating to the US. This helps support the Trump administration’s strategy of
bringing jobs back to the US and encouraging domestic manufacturing.
Second, the protectionist policy of the Trump administration, the US is consolidating
its position as a superpower on the world cadastral map.
Since taking office, President Donald Trump has pursued a protectionist trade policy with
the goal of “America First” and “making America great again”. This protectionist trade
policy not only leads to a trade war with China but also leads to trade conflicts with
countries that are considered allies of the US (such as EU, Japan, Korea) or neighboring
countries, close to the US (such as Canada, Mexico).
Immediately after taking office, Mr. Trump withdrew from or asked to renegotiate a
series of free trade agreements (FTAs) that the US had signed or was implementing.
Reducing the trade deficit and re-establishing the fair game when doing business with

China are among the goals Trump has made since his 2016 presidential campaign. The
fact that Mr. Trump keeps his promise to the voters who have backed him will give the
Republicans a great advantage in the upcoming midterm elections.
With the above developments, a trade war between the US and China has turned from a
mere risk of escalation to a real war.
Third, China’s ambition to become the world’s leading technology nation.
Although the US trade deficit with China is seen as an external cause of the trade war.
The core issue of the tension between the two countries is that the US is concerned about
China's ambitions to become the world's leading technology nation.
To become an advanced economy in the world, independent of the import of key
technologies from major competitors, China is currently pouring billions of dollars into
its “Made in China” program 2025 (Made in China 2025)” to create a driving force for
the development of key technology industries, including robotics, artificial intelligence,
aerospace, electric cars, and 5G Internet technology.
The paradox is that China’s ambition is great while its technological level is still limited.
To implement the “Made in China 2025” strategy, Chinese companies must rely on core
technologies from the US.
The US accuses China of tacit agreements that are forcing American companies to
transfer technology to Chinese partners in joint ventures. China denies this allegation.
However, the US also accused China of trying to get American technology through
methods such as importing technology or even stealing technology.
Another method used by large Chinese companies (e.g., ZTE, Huawei, China Mobile) to
acquire American high technology is through mergers and acquisitions with American


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companies.
Fourth, the situation of piracy is serious in China.
The US has repeatedly accused China of serious intellectual property rights infringement,

especially for the copyrights of US companies. The US government believes that US
companies lose billions of dollars each year due to the theft of Chinese trade secrets. This
stems from the very weak ability of the Chinese legal system to protect intellectual
property rights.

5. Factors affecting FDI attraction
5.1 Policies
- Stable monetary policy and level of currency risk in the host country. The first
factor here contributes to the expansion of export activities of investors. If the VND
exchange rate is raised or lowered, it will adversely affect import and export activities.
- Trade policy. This factor has special significance for investment in the field of
export goods. Tariff levels also affect export prices. Low import and export limits and
other trade barriers in the field of import and export may not be attractive to foreign
investors. It is this factor that complicates export procedures and is classified as another
export barrier.
- Tax policy and incentives. Preferential policies are often applied to attract
foreign investors.
- Macroeconomic policy. If this policy is stable, it will contribute to creating
favorable conditions for the activities of both local and foreign investors.
5.2 Investment law
- This factor can limit or hinder the operation of foreign companies in the local
market. (This law usually protects the interests of the natives.) Many countries are open
to attracting foreign investment under the same conditions as for local investors.
- In Vietnam, the implementation of the law on foreign investment promotion is
slow and does not meet expectations because the level of incentives and incentives is still
limited and inconsistent.
5.3 Other influencing factors
- The leading factor is the characteristics of the local market (the size and capacity
of the market, the purchasing power of the local population and the ability to expand the
investment scale).

- Characteristics of the labor market. Workers are the top concern here, especially
for foreign investors who want to invest in labor-intensive sectors with large production
volumes. The level of occupation and education of the leading workers (with potential


7

and prospects) has a certain meaning.
- The ability to repatriate invested capital. Capital and profits are freely crossborder (repatriation) is an important prerequisite to attract foreign investment. In some
countries carrying foreign currency, it is cumbersome to obtain a license from the central
bank.
- Protection of property rights. This right includes the rights of inventors, patents,
copyrights, including trademarks and trade secrets, etc. This is a factor that is especially
important for those who want to invest in the industries with high scientific content and
dynamic development (such as manufacturing computers, means of communication,
etc....) in some countries, this field is examined, supervision is quite lax, common is the
illegal use of these foreign technologies. It is for this reason that some countries are
excluded by investors from the list of countries capable of receiving investment capital.
- Adjusting investment activities of foreign investment companies. Rigid
regulations also increase the costs of foreign investment firms. Investors love to have
freedom in the operating environment and so they are very interested in a flexible law
that helps them respond flexibly and effectively to market movements. For example,
there are countries that prohibit layoffs, which are not in the interests of foreign
companies. Bank interest rate policies and preferential policies for some regions also
make sense for investors in some countries.
- Political stability in the destination country and in the region. This is a weakness
that cannot be underestimated when investing capital because political risks can cause
great damage to foreign investors.
- Infrastructure development. If the above factors are all favorable but only a
certain stage in the infrastructure (transportation, electricity and water) is lacking or

weak, it will also affect and reduce the attractiveness of investors.
III- FDI into Vietnam before the US-China trade war
1. Positive side
Foreign investment contributes significantly to the State Budget
In 2017, FDI into Vietnam reached nearly 36 billion USD, the highest in the past
10 years. According to a report by the Foreign Investment Department (Ministry of
Planning and Investment): In 2017, the total FDI capital into Vietnam reached 35.88
billion USD, up 44.4% over the same period in 2016.
Disbursement record: 17.5 billion USD, FDI around 11-12 billion USD. According to the
Foreign Investment Agency, there were 115 countries and territories investing in Vietnam
in 2017, in which, Japan led with a total registered capital of 9.11 billion USD,
accounting for 25.4% of the total capital. FDI into Vietnam; South Korea ranked second
with a total registered capital of 8.49 billion USD, accounting for 23.7% of total
investment capital and Singapore ranked 3rd with total registered capital of 3.17 billion
USD, accounting for 14.8% of total capital investment.


8

Foreign investment contributes to economic and labor restructuring, improving
industrial production capacity
The industrial growth rate of the FDI-invested economic sector is higher than the
general industrial growth rate of the whole country, contributing to promoting economic
restructuring towards industrialization and modernization (industrialization and
modernization). , increasing the proportion of the FDI sector in the industry over the
years.
Thus, when looking at the impressive figures of 2017, FDI has contributed to
changing the face of the economy, creating growth, jobs and income for workers.
However, the fact that countries pour FDI into our country is not a charity work, they
spend 1 dong surely they have to accumulate more than 1 dong.

2. The negative side
Imbalance in industry and region: The highest goal of investors is profit.
Therefore, the fields, industries and projects with high profit rates are interested by
investors, while projects and fields that are necessary for the people's livelihood but do
not bring satisfactory profits are not cannot attract foreign investment.
For example: Investment in the fields of expertise, science and technology, health
services, culture, education and training, agriculture, forestry, fisheries... FDI while
choosing locations to deploy investment projects often focuses on places with favorable
socio-economic infrastructure, so big cities, localities with seaports and airports. The
lowland provinces are the places where most FDI projects are concentrated. Meanwhile,
mountainous, remote and remote provinces such as the Central Highlands and the
northern mountainous areas - localities that need to accelerate economic development,
although the government and local authorities have higher incentives but are not
interested by investors.
Weakness in technology transfer: In general, the technology used in FDI
enterprises is usually higher than the level of technology and the same type of product in
our country.
IV- Vietnam's FDI in the midst of the US-China trade war
The US-China trade war is an opportunity for Vietnam to participate more deeply in the


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global value chain, improving the quality of FDI flows but also has a lot of knowledge to
face.
1. Positive impact
Vietnam is an ideal destination to replace China: Welcoming the wave of FDI
moving away from China
- To some extent, Vietnam has a number of attractive features that could benefit
from the relocation of FDI enterprises. First of all, Vietnam has a relatively stable

government and low wages, which are advantages that other countries do not have.
Furthermore, Vietnam's proximity to China, coupled with its geographical location in the
ASEAN region, allows manufacturers to sell and move equipment across borders faster.
Companies can sell and move goods and equipment from China to Vietnam and then
forward to other ASEAN countries. At the same time, Vietnam has a strong economy,
reflected in a growth rate of 7.08% - compared to 6.6% for China and 7.4% for India.
With an annual growth rate of more than 5% over the past 20 years, Vietnam has become
one of the emerging countries with the fastest and most stable economic growth. Vietnam
is ranked 69th in the World Bank's 2019 Ease of Doing Business report, better than
China's 78th place.
- Companies in certain sectors will move out of China or diversify from the
Chinese market to Vietnam. According to government data, total disbursed FDI increased
6.3% to $12 billion in the first eight months of 2019 compared with the same period last
year, with the number of newly registered projects increasing by 25% to 2,406. For
Vietnam, October 2018 PMI increased from 51.5 to 53.9 points as the number of new
export orders increased for three consecutive months from August to October. Analysts
from Mizuho Research Institute said that even if the global economy slows down, the
relocation of companies from China to Vietnam is expected to continue. Multinationals
such as Foxconn, Samsung and Daikin have been opening new factories in Vietnam
instead of China, as Chinese factory wages have doubled in the past seven years. Some
companies, especially those that make furniture, refrigerators and car tires have shifted
production to Vietnam, South Korea, Taiwan and Mexico due to the ongoing US-China
trade war. Recently, Ohio-based Cooper Tire and Rubber Co entered a joint venture with
Sailun Vietnam Co., Ltd. to build a tire factory near Ho Chi Minh City, while another
American company is Key Tronic Corp Corporation has signed an agreement to lease a
production facility near Da Nang.
- The fact of the matter is that the US-China trade war not only opens up
economic opportunities for Vietnam but also highlights the difficulties that Vietnam has
to face. As manufacturing in China remains attractive to multinational corporations due to
the country's good skills and modern infrastructure network. Basically, enterprises cannot

leave the Chinese market because the market capacity is too large, unless the Chinese
side has policies that are seriously detrimental to production and business activities.
Therefore, businesses will only diversify investment locations to avoid risks in the
Chinese market. Through research, recently, the Chinese side has made moves to support
and comfort businesses, especially large corporations (in high technology, source
technology). For example, Premier Li Keqiang of China met directly with Taiwan's Hong
Hai Group (Foxccon) and pledged to support the Group to do business in China. intention
to move the iPhone assembly plant out of China). Local leaders of China also regularly
interact with businesses, pledging to support the damage caused by the trade war to


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businesses, in order to encourage businesses to continue to invest in business. eat in
China. In fact, after 7 months of 2019, newly registered FDI in Vietnam has 2,064
projects with a total registered capital of nearly 8.3 billion USD, up 24.6% in number of
projects but decreased by 37.4 % of registered capital compared to the same period in
2018, making the total newly registered capital and additional capital decrease by 35.6%
over the same period in 2018, while realized FDI capital also increased by only 7.1% and
reached 10.6 billion USD.
· Attract FDI from other countries
- Since the outbreak of the trade war between the US and China, Vietnam is
considered one of the top beneficiaries as businesses look for new locations for
production, avoiding increased tariffs on other countries. items. This promotes foreign
investment (FDI) inflows into Vietnam.
- According to data from the US International Trade Commission, imports of mobile
phones from Vietnam more than doubled in the first four months of 2019 compared to the
same period in the first four months of 2018 and computer imports also increased by
79%. compared with the same period. There has also been an increase in the amount of
Vietnamese garments, textiles, furniture and dried fish exported to the US, items that

were previously processed in China before Trump's tariffs increased. Overall, Vietnam's
exports to the US increased by 27.3 per cent in the first six months of 2019, as a result of
the trade war. According to Yasuyuki Sawada, Chief Economist of the Asian
Development Bank, Vietnam benefits the most from the US-China trade war because
Chinese goods affected by tariffs are also consumed and produced. in Viet Nam. can
export these products directly to the United States, and thereby gain more market share
from Chinese products subject to tariffs when exported to the United States. At the same
time, it can attract more FDI into these industries, thus creating more jobs, increasing
exports and improving Vietnam's overall trade balance.

-

According to the General Department of Customs, the value of Vietnam's exports
to the United States reached 47.53 billion USD at the end of 2018 - an increase of


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14.3% compared to 2017. In the first half of 2019, Vietnam's exports South to the
United States. The United States was worth $22.72 billion - up 27.5% over the
same period in 2018.11 Phones and components had the highest increase,
reaching $4.18 billion - up 92%. Computers, electronic products and components
reached 2.3 billion USD, up 72%. Meanwhile, China's exports of these two
product groups to the US decreased by 27% and 13% respectively.12 For mobile
phones, Vietnam is currently Samsung's largest manufacturer with an output of
about 240 million units. / year. followed by China with an output of 150 million
units per year. Samsung is planning to cut production in China by about 40
million units due to high labor costs and the US-China trade war. These
Vietnamese industries are able to gain a larger share of the US market thanks to
more competitive prices as well as attracting more FDI.

- However, Vietnamese businesses are not benefiting as expected from the US-China
trade war because foreign businesses are reaping all the fruits of their exports. A recent
report by financial data provider Fiin Group found that foreign-invested companies
accounted for nearly all of the increase in exports to the United States as their trade with
China increased. In the apparel sector, for example, Vietnamese companies accounted for
only 16% of export value from June 2018 to 2019, while FDI companies accounted for
the remaining 84%. Korean garment manufacturers in Vietnam have been the biggest
winners from the trade war, with 143 Korean companies accounting for nearly half of
Vietnam's garment exports during the period.
- A similar situation can be seen in the export of phones and components. South
Korean and Taiwanese companies accounted for 98% of Vietnam's total exports of
phones and components in the year ended June 2019, dominated by Samsung and
Foxconn, Taiwan's main suppliers to Apple.

· Chinese FDI into Vietnam
- Another effect is that Chinese businesses may seek to invest in other Asian


12

countries - including Vietnam - to produce goods for export to the United States. In terms
of investment value, China is the 4th largest foreign investor in Vietnam with a total
registered capital of 2.02 billion USD, in the first 5 months of 2019. Compared to the
same period in 2019, FDI first New registrations from China increased to $1.56 billion,
of which China led in terms of newly registered FDI. While the strong increase in the
committed capital of Chinese FDI into Vietnam is a good sign, Vietnam also has potential
risks that Vietnam needs to be careful about.
importance on the type and quality of Chinese technology and projects, in the face of the
infamous image of Chinese companies in the eyes of Vietnamese people.
- The fact that companies from mainland China implemented 389 FDI projects in

Vietnam in 2018, when manufacturing industries moved production from China to
Vietnam in search of cheaper labor costs, but also try to escape the higher US tariffs on
Chinese goods. Before Donald Trump and President Xi signed a 90-day truce in
December 2018, US sanctions on Chinese goods amounted to $250 billion.
- Earlier, some experts warned that China could export its goods through Vietnam
to the US In the first seven months, Vietnam's exports of computers and components to
the US increased by 85%. compared to the same period last year, but imports from China
also increased by 66%. In recent months, customs authorities have found that products
imported from China are repackaged with the label "made in Vietnam", and the
government is intensifying inspections to prevent violations offense.
2. Negative impact:
Vietnam is emerging as an FDI attraction with many advantages: cheap labor,
political stability. However, there are some limitations as follows:
· Firstly, flooding in the central region and how to solve it is always a difficult
problem for the government. Infrastructure in Vietnam is unevenly developed, as is the
distribution of the workforce. The cheap labor force in the mountains is underutilized.
Warehouses and wharfs in our country have not met well or there is congestion.
Second, the dizzying rise of China's FDI is now a problem. Because of the strict
environmental regulations in China, Chinese companies are shifting production in
Vietnam. Environmental standards in Vietnam are relatively low compared to other
countries in the world, so they can cause serious environmental pollution for our country.
Thirdly, China has increased investment in Vietnam to achieve "Made in
Vietnam" origin in order to benefit from tax and tax orders from the US. When the US
sees too much FDI inflow to Vietnam, the US will be wary, considering the risk that
Vietnam is an intermediary for Chinese goods imported into the US. Therefore, the
Vietnamese government must strictly control this issue. .
For example, the US has imposed sanctions on Vietnam's steel products. The US has
imposed a tax on steel products with a very high tax rate (456.2%, in 2020) because it
believes that Vietnam's steel products are imported from China, evading taxes to then be
exported to the US. It can be said that Vietnamese steel is being unjustly infected by

Chinese steel. The control of origin of C/O must be as important as it is now, when
products exported to Vietnam's main market are at risk of being disguised. According to
statistics from the Trade Remedies Department (Ministry of Industry and Trade), in the
first eight months of 2019, there were seven cases of investigation into Vietnamese
exports. The investigated items include aluminum, steel, plywood, household appliances,


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seafood, solar cells...
V-CONCLUDE AND SOLUTIONS
The trade war reduces the global economic growth, especially that of the two
main countries, the US and China (two major trading partners of Vietnam), thereby also
greatly affecting FDI inflows. into Vietnam.
In terms of investment, in theory, the trade war will increase risks to the global
economy. Capital flows will tend to leave emerging markets like Vietnam. Other face,
Vietnam is in the string product of China, and Vietnam is heavily dependent on
investment from China. China is becoming the largest investor in Vietnam, with a total
cumulative investment capital of 60.7 billion USD in 2017. Some major investment
advice is poured directly into the company, to create the details for Chinese goods
exported to the US.
Regarding US investment : the trade war can be an " excuse " for President Trump
to create barriers , or incentives to encourage US corporations to withdraw capital back
home . That may slow down the flow of US investment in Vietnam. There are also
opinions that , at present , the US reduces imports of Chinese goods and increases
imports from Vietnam , so factories in Vietnam will expand and increase capacity . When
the war ends , if the US turns to buy Chinese goods , Vietnam will have excess capacity ,
deflation , increase in inventories ... then difficulties will be unpredictable . The trade war
broke out, the yuan devaluation would make the Vietnamese dong depreciate and the
Vietnamese stock market to drop.

When the trade war between the US and China stabilized, Vietnam boosted
production, attracted foreign investors and increased exports to the US. According to
official government data, the country's GDP in 2019 remained strong at 7%, the highest
in Southeast Asia. It also had the second-strongest first-quarter growth in the past decade,
surpassing only 7.45% in 2018. Exports to the United States were up 34.8% year-on-year
in the first nine months (2019).
The US - China trade relationship dominates the development of global trade and
investment, so the US - China trade conflict can slow down international trade, thereby
affecting Vietnam's export ability. both in quantity and in price. Vietnam's continuous
trade surplus with the US with tens of billions of dollars a year can make the trade
sanctions that the US has for China on the grounds of a heavy trade deficit with China
can also be extended. applied to Vietnam for the same reason, albeit to a lesser extent.
Pressure from the US may cause China to reduce the flow of goods exports to other
markets, including Vietnam, making the trade deficit with China increasingly heavy,
especially besides trade. There is also informal trade that Vietnam has not yet controlled.
The economic and trade race between the US and China with a focus on high-tech
goods and services will force China to change its technology to be modern enough to
compete with American technology. Therefore, China's obsolete and discarded


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technologies can find a "landing point" in Vietnam. In fact, the import of machinery and
equipment for production lines from China into Vietnam has increased sharply in recent
years, supported by both direct investment and Chinese loans. Besides, in order to avoid a
trade war, a part of FDI inflows drawn from China associated with high technology can
choose Vietnam as a destination.
The US-China trade relationship always has many potential risks of conflicts,
disputes, even technology trade wars and entails currency wars, so Vietnam must always
be ready to prepare optimal solutions to reduce the risk of conflicts. minimize negative

impacts on trade, investment and monetary finance,... The USD continued to appreciate
due to the high growth of the US economy, low unemployment rate and the Fed's
reduction in USD interest rates while the yuan lost Strong prices due to the consequences
of the US-China trade war will put pressure on Vietnam's exchange rate management
policy.
*Solutions to minimize the impact on Vietnamese businesses
• In terms of awareness, we must clearly see that trade competition is inherent in
the market economy. Trade war also has two sides as pointed out above. Our task is to
find the advantages to exploit, take advantage of opportunities, overcome difficulties. For
Vietnam, although it has not been caught up in the trade war, but is an active participant
in the formation and development of the global value chain, surely we cannot avoid the
effects of the war.
Macro solutions:
– Continuing to maintain the goal of macroeconomic stability in 2019, without
sacrificing stability in exchange for economic growth: In the context of global instability,
political and macroeconomic stability should continue to be the goal Vietnam's priorities
to ensure a favorable and attractive investment environment.
- Flexibility in exchange rate management: it is possible to consider loosening the
reasonable exchange rate band for 2019 especially in the context that other countries'
currencies are plummeting in 2018 - 2019 (Indonesia, India, etc.) reduce Vietnam's
competitiveness in exports and attract FDI.
– There are policies to promote investment of all economic sectors in 2019-2020:
This is a period when the global economy is going down and growth is slowing down.
Therefore, in order to maintain the growth momentum of 7%/year, solutions to unlock
investment resources from the private economic sectors and FDI need to be implemented
quickly (such as the early adoption of the PPP Law).
– Actively prepare conditions and take advantage of opportunities in integration
with economies in CPTPP, EVFTA, etc. in the coming time: strengthen trade and
investment promotion delegations with the above countries.
– Accelerate the equitization process of State-owned enterprises in order to create

flexibility and dynamism in improving and accessing new technologies from FDI
enterprises: I.
Regarding solutions to attract FDI:
- Establishing a joint working group for international trade - investment activities
according to the model of macroeconomic management organization 1317: The operating
organization has 01 deputy head and the direct focal point is the Ministry of Planning and


15

Investment. plan and Invest. The members are leaders of related ministries, departments
and agencies from different ministries. This organization is responsible for advising the
Prime Minister on: (i) Flexible investment priority mechanisms to attract highly spillover
FDI, (ii) Monitor factors affecting the spillover of FDI. FDI (such as technology transfer,
connection with domestic enterprises) and propose policies to enhance spillover, (iii)
Monitor developments of tensions between countries, trade wars, etc. trade and
protectionist trends of trade associations and propose appropriate solutions.
– Increased initiative in investment promotion: Leaders of ministries and branches
actively go abroad to approach large corporations. Proactively propose flexible incentives
for these corporations to attract large enterprises with pervasive power, holding high
technology and source technology to invest in Vietnam.
- Additional funding for investment promotion activities in accordance with the
scale, number of investors and the investment market to be promoted.
– Building technical barriers towards the goal of improving the quality of FDI (in
technology transfer, in connection with the local economy) and at the same time
preventing FDI projects that have the risk of causing environmental pollution. FDI
projects in areas sensitive to national security and defense (by planning fences,
technology…) or too small-scale FDI projects (by visa barriers on entry and exit. FDI
enterprises that create 100 jobs or more for Vietnamese people have an open visa policy;
conversely, for micro FDI enterprises, creating less than 10 jobs, only short-term visas are

issued. tourist visa for investors…).
– Develop specific mechanisms to create a favorable business investment
environment to attract high-tech FDI projects in the context of Industry 4.0 through the
following specific solutions:
+ The government develops or has policies to encourage enterprises/organizations
to build big data warehouses.
+ To step up investment in developing information technology infrastructure (5G),
connecting traffic to and from hi-tech parks.
+ Attract investment in infrastructure and services so that high-tech zones and
cities become areas with high quality of life, meeting the requirements of international
human resources in the high-tech field.
+ Having a mechanism to attract high-quality human resources in the field of
Industry 4.0 (such as granting open work visas), proactively approaching the talented
Vietnamese workforce abroad.
+ To attract and adopt policies to support universities in training high-tech
industries, developing interdisciplinary training programs (such as information
technology and finance, information technology and agriculture...).
+ Accelerate the construction progress so that the National Innovation Center will
soon come into operation and promote its effectiveness.
About the goverment
- Actively and closely follow the developments of the trade war. Must analyze and
forecast in detail, specific direct as well as indirect impacts. From there, offer
solutions for each scenario, such as adjusting interest rates, depreciating currency
and import tax accordingly.
- Well control the border, as well as import activities to minimize fraud in import,
illegal transshipment of goods, affecting the reputation of Vietnam's goods;


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strengthen inspection right from the issuance of C/O and after granting and
channeling to identify high-risk products and businesses.
- The State must develop a strategy to diversify products and export markets to
spread risks and avoid concentrating exports on one market. For example, in
terms of rubber, to compete with China, Vietnam can expand into the Indian
market.
- Continue to create a transparent investment environment, increase FDI attraction
from the US, strengthen technological capacity to attract FDI enterprises,
especially focusing on high technology.
- Strictly control foreign currency, prevent foreign investors' divestment;
proactively respond to measures to strengthen the trade protection system from
the US; actively deal with exchange rate fluctuations.
- It is necessary to have solutions to maintain traditional markets such as the EU,
Eastern Europe, exploit the areas with potential for development, etc.
On the business side
- First of all, businesses need to stay calm, avoid panic and need to actively seek
information, warn early about developments in the trade war, in order to have a
response solution; at the same time, ready to adjust production, business, supply
and market as flexibly as possible.
- More efforts are needed in improving product quality, through innovation and
technology application. From there, improve competitiveness to cope with the
worst possible situations.
- Select products suitable to the level and skills of the business, as well as products
that are price-competitive and have big brands to develop and promote exports.
Actively looking for other more stable and favorable markets.
- Pay more attention to the exploitation of the domestic market.
- There should be linkage and information for each other, in order to have programs
and plans to deal with the happenings. Keep in contact with State management
agencies to protect the interests of enterprises
- It is necessary to be cautious in linking, or acting as a trade bridge between

Chinese enterprises and the US market, to limit unnecessary risks.
VI- REFERENCES
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