Unlocking Trade Potentials in China-ASEAN Relations: The China-Vietnam Context

Abstract

The China-ASEAN trade relationship is multidimensional. The trade situation between China and Vietnam is not similar to that of China and the ASEAN5, as the former records trade surpluses with Vietnam in agriculture and manufactures. Bilaterally, China’s exports are also more homogeneously distributed relative to Vietnam, and comprise higher value-added intermediates. Despite the asymmetry in terms of economic capacity between China and Vietnam, it is not one-sided nor is it all downside, as there is a high level of economic interdependence between the two. The empirical results from the stochastic frontier analysis indicate that Vietnam’s trade efficiency with China is somewhat comparable with the levels achieved by the other ASEAN members in trade with China. Importantly, Vietnam’s exports of agriculture products to China are operating closer to its potential level than China’s exports to Vietnam. Overall, there remains scope for an improved efficiency of two-way bilateral exports in the China-Vietnam partnership. It is therefore seemingly untrue to assume that only the larger side could get more from this relationship.

Keywords: gravity; stochastic frontier analysis; trade efficiency; China; ASEAN; Vietnam