"Vietnamese businesses can create general products similar to those imported from China or other countries, but we have yet to establish a comprehensive economic system with continuous, stable, and sustainable policies for long-term production," said Dr. Nguyen Quoc Viet, deputy director of the Institute for Economic and Policy Research (VEPR), in an interview with The Saigon Times.

Cheap goods from China from a market economy perspective The Saigon Times: The influx of cheap Chinese goods is a challenge for many ASEAN countries such as Thailand, Indonesia and Malaysia. What do you think about this? Is it a short-lived issue, or will this pressure continue to grow because China, as a large nation, has reached a production scale that requires constant market expansion? Dr. Nguyen Quoc Viet: This is not a new issue. In the context of fluctuating external demand, such as the severe downturn during the Covid-19 pandemic and in 2023 due to trade tensions between China and the West, there was a surplus of Chinese-produced goods. As a result, Chinese businesses had to aggressively seek new markets, with ASEAN being the first target, while their businesses benefited from strategies involving low-cost competition. Moreover, China pursues large-scale production policies. With each product, economies of scale allow Chinese manufacturers to offer attractive prices. Once businesses reach their maximum profit threshold, they would clear remaining stocks as soon as possible to recover capital and prepare for the next production cycle. After this maximum profit threshold is met, Chinese producers may apply flexible pricing strategies. For products at risk of overstocking, they might sell them at or below cost to maximize capital recovery and prevent inventory from building up. Vietnamese businesses, or those in any country with the opportunity, would choose the same approach. That is how market economies work. Furthermore, the trend toward fast consumption is becoming more dominant in many markets globally. The quicker product turnover accelerates the production and consumption rate of Chinese manufacturers. Therefore, with common, everyday products, Chinese firms have an advantage in most markets. Not just Vietnam, but other ASEAN countries are also seeking solutions to deal with the influx of cheap Chinese goods. International media reports indicate that countries like Thailand, Indonesia, and Malaysia have used or plan to use tax tools or WTO anti-dumping methods. In Vietnam, steel companies have filed for an anti-dumping investigation against hot-rolled steel from China (and India). How do you evaluate these approaches? - From an economic perspective, the influx of Chinese consumer goods into ASEAN at prices that domestic products cannot keep up with is a normal phenomenon. Using taxes or trade defense measures to hinder the flow and consumption of Chinese goods may become a double-edged sword. On the positive side, these measures drive up the prices of Chinese goods in ASEAN markets, creating an opportunity for domestic goods to recapture the market. On the negative side, even with restrictive measures, local products from countries like Thailand, Indonesia, and Vietnam may not have a competitive edge due to China’s massive production scale and flexible pricing strategies. As a result, domestic production may not be effectively encouraged, and if the restricted products are input materials for another industry, such measures may hinder production growth in other sectors. It is important to note that initiating and pursuing an anti-dumping case requires significant human, intellectual, time, and financial resources. For specialized goods like steel, it may be easier to gather legal evidence and demonstrate a practical basis. However, even in such cases, the process from initiation to a ruling by the authorities demands significant costs from businesses. This is a reactive, situational solution and should be considered a last resort. Creating motivation for domestic businesses What are the weaknesses of Vietnam's manufacturing sector? Could you analyze the causes of these challenges? - Vietnam's manufacturing industry has not encouraged the production of goods for the domestic market that can compete directly with similar products from China or other ASEAN countries. Currently, Vietnamese businesses are more focused on trading and real estate rather than investing resources in manufacturing, especially in producing essential goods for domestic consumers. For these types of products, they are mostly produced in isolate localities, utilizing comparative advantages, often tied to agricultural or locally sourced products with limited cross-sectoral or regional reach. Goods requiring industrial-scale production, particularly in processing and manufacturing, are less competitive. The domestic market for these products is almost left open to Chinese and other foreign goods. Even for companies in the agro-forestry and fisheries processing sectors, they are more export-oriented and less focused on domestic demand. On the policy front, we lack measures to encourage businesses to produce goods for the domestic market. On the demand side, there are no clear criteria for identifying what is "Made in Vietnam" or "Make in Vietnam." This gap persists despite the "Vietnamese People Prioritize Vietnamese Goods" campaign, leaving open the question of whether the promoted products are genuinely Vietnamese. This has led to efforts to showcase examples at certain times without creating a widespread impact or fostering a sense of pride in locally made goods. The difficulty in identifying high-value-added, domestically produced Vietnamese goods also hinders regulations requiring a certain percentage of Vietnamese goods in supermarkets or convenience stores, thus failing to boost domestic production. On the supply side, Vietnam no longer has to import basic items like needles, threads, nails, and screws, and local businesses can create common products similar to imports from China or other countries. However, we lack a synchronized economic system and continuous, stable, sustainable policies for long-term production. For example, encouraging mass industrial production requires generating sufficient demand, not just launching short-lived campaigns. Though some pro-manufacturing policies have been implemented, they often focus on export-oriented goods. Support programs for small and medium enterprises (SMEs) in technology innovation or product creation still have limited commercialization, with minimal spillover impact. We have proposed focusing on products that meet "Make in Vietnam" criteria, regardless of whether they are produced by foreign direct investment (FDI) enterprises or domestic firms. Such policies are designed to enhance competition against similar goods imported from China and other countries, helping Vietnamese goods capture the domestic retail and e-commerce markets. At the same time, we must motivate Vietnamese businesses to shift their investment focus from trading and real estate to manufacturing. We need to create a truly transparent and equal business environment for domestic enterprises, FDI companies, export-oriented businesses, and those serving the domestic market. However, in terms of competing with Chinese imports, what should be the approach? - There is currently a significant imbalance. Domestic manufacturers face high compliance costs, including corporate tax, value-added tax, and social insurance for workers. Meanwhile, Chinese imports that enter Vietnam through informal channels often evade these obligations, particularly taxes. This imbalance is also seen in distribution channels. For example, Ninh Hiep Market has become a hub for textiles and garments in Hanoi and northern provinces because it serves as a distribution center for goods entering through northern border crossings. Small traders operating here are often individual households, paying lump-sum taxes that are much lower than those paid by traditional distribution companies. When individual traders move online, the informal nature of their business remains. Although authorities try to monitor e-commerce, taxes are still collected on a lump-sum basis, based on reported revenue, and such efforts only help expand the tax base. Informal e-commerce activities via TikTok or Facebook lack strict oversight. Instances of tax evasion and recovery are often intended as examples rather than consistent enforcement. The management of imported goods' environmental safety, counterfeit, or substandard quality is not as rigorous as for goods produced by businesses with clear addresses, factories and warehouses. All of this reduces business costs on e-commerce platforms, encourages imports from China, and discourages domestic investment in production. We must find ways to minimize these discrepancies by lowering compliance costs, ensuring fairness, and prioritizing key industries, while also tightening control over Chinese imports and e-commerce activities. Otherwise, the domestic manufacturing sector will weaken, and not only will we lose the domestic market, but our export capacity will also gradually decline.