Slew of deals expected during Xi’s historic visit to Vietnam this week

[HO CHI MINH CITY] Chinese President Xi Jinping arrives in the Vietnamese capital Hanoi on Tuesday (Dec 12) for a two-day state visit, a historic trip that coincides with the 15th anniversary of the two countries’ strategic cooperative partnership.

Xi’s first visit to Vietnam since 2017 comes just three months after US President Joe Biden’s stopover in Hanoi in September, during which Washington elevated its relations with Vietnam to the highest diplomatic level.

Apart from China and the US, Vietnam also places Russia, India, South Korea and Japan in the same highest tier in its diplomatic hierarchy.

Analysts said that the US and China – the world’s two largest economies – have been jostling to exert influence over the South-east Asian country due to its important geopolitical position in the region.

Xi is set to attend an official welcome at the presidential palace on Tuesday, where he will meet Nguyen Phu Trong, the leader of Vietnam’s ruling communist party. A day later, he will meet Prime Minister Pham Minh Chinh and President Vo Van Thuong.

There are “very high expectations” for this visit by Xi, which Vietnam’s permanent deputy minister of foreign affairs Nguyen Minh Vu described as a “new historic milestone” for bilateral ties, as reported in the Tuoi Tre newspaper.

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The discussions between the two countries will revolve around six major areas – politics, security, practical cooperation, public support, multilateral affairs and maritime issues – said Chinese Foreign Ministry spokesperson Wang Wenbin at a press briefing.

Xi’s visit comes on the back of a string of high-level meetings involving both sides in recent months. On Dec 1, President Thuong met Chinese Foreign Minister Wang Yi in Hanoi. A week earlier on Nov 25, Chinh received Chinese Minister of Commerce Wang Wentao in Ho Chi Minh City.

And in October 2022, Vietnamese party general-secretary Nguyen Phu Trong was the first foreign leader invited to visit Beijing, just days after the 20th National Congress of the Communist Party of China.

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Major deals

Vu, the permanent deputy minister of foreign affairs, hinted at “a large number” of agreements to be signed during Xi’s visit.

The state paper Tuoi Tre, citing Chinese ambassador to Vietnam Xiong Bo, reported recently that China is ready to offer grants to Vietnam to boost the railway between Kunming and the Vietnamese port city of Haiphong, as well as other transport links from southern China to Hanoi.

While these grants have been offered for years, analysts said Vietnam has been reluctant to accept such loans out of concerns of an over-dependency on China as well as due to heightened disputes in the South China Sea.

For instance, Vietnam has yet to begin the renovation of the existing Hanoi–Lao Cai-Hai Phong rail route in the north, as well as the construction of the North-South express railway connecting its two largest cities of Hanoi and Ho Chi Minh City.

Deepening trade ties

On the economic front, China has been Vietnam’s largest trading partner for the last 20 years. Vietnam is also China’s top partner in Asean, with bilateral trade reaching US$175.6 billion in 2022.

While the global economic slowdown weighed on Vietnam’s exports, which plunged 5.9 per cent from a year ago to US$322.5 billion in the first 11 months of 2023, China is the only major market that has increased imports from Vietnam this year, according to a report from Vietnam’s trade ministry.

As at November, Vietnam’s exports to China rose 6.2 per cent year on year to US$56 billion. This is in stark contrast with the 13.1 per cent year-on-year slump of Vietnam’s exports to the US (US$88 billion), its largest export market, official data showed.

Vietnam’s trade deficit with China reached more than US$60 billion last year. In 2022, Vietnam exported US$371.3 billion worth of goods to the world but imported roughly a third of that value from China (US$117.7 billion). The breakdown of these figures implies the heavy reliance of Vietnam-based firms on Chinese components and materials for export-led production, analysts said.

Registered investment capital from China and Hong Kong combined has nearly doubled this year to US$8.2 billion, above pre-pandemic levels. The number of newly registered projects from Chinese investors in Vietnam as at Nov 20 was the highest among all investors, accounting for 22.1 per cent of the total, according to official government data.