Thursday, June 11, 2009

China's Rise Stirs Vietnam's Anxiety

China's Rise Stirs Vietnam's Anxiety

If there was a need to identify a consensus among Vietnamese across the spectrum from domestic to overseas, it must be the uneasy feeling towards China. The Vietnamese mentality regarding national security from time immemorial has been that of vigilance on China.

Although Vietnamese pride for fighting off foreign invasions always runs high, the country’s history of 1,000-year Chinese domination is painful enough to be a relentless reminder. And three current developments seem to reinforce it to a significant extent.

First, over the past few months, the Vietnamese public outcry against Chinese involvement in Vietnam's bauxite mining plan in the Central Highlands has been dramatic. The list of accused Chinese elusive intentions is long, ranging from exporting environmental degradation to compromising Vietnam's national security. This phenomenon is unprecedented and shows an increasing contrast between the Vietnamese populace and government towards Chinese investments.

A quick look at the way Chinese companies carry out their bigger projects in Vietnam may provide a reasonable explanation for this sentiment. When constructing huge electric, cement, chemical and mining plants in Vietnam, instead of hiring locally, Chinese companies usually brought their own workers with them.

Most of them are unskilled laborers, who currently cannot legally work in Vietnam according to the country's labor regulations. Recent reports by popular Vietnamese media have shown an influx of Chinese laborers into Chinese-implemented projects, with some sites having in excess of 2,000 workers each. From the Vietnamese public's perspective, this is both undesirable for local employment and potentially difficult for public and national security.

Moreover, as pointed out by Vietnamese critics, the transfer of older and less environmentally-friendly technologies from China to carry out many of those projects does create a fear that Vietnam is becoming a dumping ground for industrial waste. In this regard, the fact that Chinese companies have increasingly won bids for big projects in key sectors across Vietnam cannot help but reinforce that fear.

Second, Vietnam's overall economic relationship with China has produced certain levels of stress on the Vietnamese economy. The country has faced a consistent annual trade deficit with China since 2001. The number for 2008 was shockingly high at more than US$11 billion, which is around 12% of Vietnam's gross domestic product. This huge trade deficit has not only put negative pressure on Vietnam's current account balance but also placed competing Vietnamese businesses in hardship since many of the Chinese imports could be produced domestically.

Currently, it does not take much effort to find out that ultra-cheap Chinese goods are flooding the Vietnamese market nationwide. If this were to happen in countries such as the US or India, one would see anti-dumping and counterveiling investigations mushrooming left and right. But the Vietnamese government, due to legal capacity and political reasons, has not ventured to address the growing concern of its domestic business community.

In addition, problems stemming from the smuggling of Chinese goods, ranging from poultry to toys, into Vietnam are also significant, imposing not only an economic cost but also a health threat as the items are largely outside the reach of the Vietnamese government. Although this is a long-standing problem, Vietnamese media has recently rung an alarm bell on the potential massive influx of smuggled goods as Chinese businesses try to rid themselves of inventory buildup during the current economic slump.

Third, overlapping territorial claims over the Paracel and Spratly islands in the South China Sea (referred to as the East Sea by Vietnam) have intensified. The Vietnamese government tried to contain public outcry against Chinese assertive claims over the islands in late 2007 and early 2008 in order to prevent diplomatic tension between the two countries. However, in the face of China's increasing assertiveness, the Vietnamese government now encourages the public to research and understand historical and legal evidence to bolster its territorial claims.
This can be seen as a very assertive move by the government of Vietnam since the country’s greatest strength lies in the will of its people as manifested throughout the country's history.

In light of the dispute, China's military buildup in the South China Sea, such as the reported secret nuclear submarine base on Hainan Island, has created anxiety in many Vietnamese circles.

In this regard, Vietnam's recently reported deal to buy six submarines amounting to US$1.8 billion from Russia may be viewed as a reaction to the Chinese development. However, given its limited economic resources, Vietnam certainly does not want to engage in any potential arms race with China. But at the same time it cannot simply sit still and watch China continue to make bold military moves in the sea.

But there is still hope for Vietnam to address these issues in the direction of mutual benefits and regional stability. First and foremost, the concerns of the Vietnamese public cannot be underestimated and should be taken into account. In this respect, regardless of being approved by the Vietnamese government, Chinese companies investing in Vietnam should be acutely aware of the environmental and political impacts of their projects and faithfully address them in accordance with accepted international business standards and norms. It is in their long-term interest to earn the goodwill of the Vietnamese people by being responsible foreign investors. In this regard, Japanese foreign direct investment in Vietnam can be a good example for them to follow.

In addition, the Chinese model of sending workers to work on its projects is politically unsound and has the potential to spark unnecessary resentment that will further complicate bilateral diplomatic relations. Stopping this practice would be a good first step to reverse the negative sentiments of the Vietnamese populace.
In the larger context of economic relations, the trade balance and the problem of smuggling must be addressed to reduce stress on the Vietnamese economy. Trade is a very important diplomatic tool to promote meaningful friendship and peace; and China is in position to do that if it is true to its “peaceful rise” claims. Of the three individual powers - China, Japan, and the US - that Vietnam considers most important in its foreign policy approach, it enjoys significant trade surpluses with the latter two. China can show significant diplomatic goodwill towards the ordinary Vietnamese people if it joins America and Japan in this regard.

With respect to the thorniest issue, any solution to the territorial dispute in the sea should be reached in a transparent manner and in accordance with accepted international principles. How China approaches this problem will be the utmost test of its adopted “peaceful development” stance. Meanwhile, there must not be any use of deadly force (on any side) against ordinary fishermen in the disputed area. They are defenseless and must be treated as such.

At any rate, some may argue that it is wishful thinking to suggest the above approaches to the three current developments identified. But it is hard to see how beneficial bilateral relations and stability would be fostered if they were to be ignored. As a rising power on the world stage with potential economic and political influences throughout the continents, China has every interest to materially show the world that its rise is indeed peaceful. It can do that by showing first its
sincerely good gestures towards Vietnam.

Although being on vigilance as usual, the Vietnamese are astute enough to embrace those gestures for the sake of peace and economic development while continuing to reinforce their hard-earned national identity.

Anh Le Tran is a professor at Lasell College (the United
States), where he teaches economics and management.

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