Vietnam: despite some headwinds the economic performance remains strong, and provides business opportunities for exporters
Some strains in the Vietnam-China relationship
The Communist Party of Vietnam (CPV) remains firmly in power, despite some public discontent over the lack of personal freedom, government corruption and land seizures by the administration. Effective measures against the spread of the Coronavirus pandemic have increased the legitimacy of the government.
The fight against corruption remains a key political issue, and the government has recently stepped up its anti-graft campaign. This has resulted in a flurry of investigations, with arrests and dismissals of higher-ranking officials and executives. With its fight against corruption the CPV aims to bolster its legitimacy, but it also wants improve the business environment in order to attract more foreign direct investment.
The territorial dispute with China over conflicting claims in the South China Sea remains a serious issue in the bilateral relationship for the future. Another issue is the construction of new dams in the Mekong River by China (and Laos), which reduces the flow of essential water to Vietnam.
In order to counter growing Chinese assertiveness, Vietnam is keen to improve its political and security cooperation with the US and Japan. However, despite enhancing its naval forces, Vietnam lacks the military capability to pose a serious challenge to any Chinese actions. At the same time, China is an important and powerful trade partner, which accounts for 17% of Vietnamese exports and 34% of imports (Vietnam´s manufacturing sector depends heavily on raw materials imported from China). Moreover, given the ideological similarities of the regimes in both countries, there is still a strong pro-China faction within Vietnam’s Communist Party.