Xi Visits Hanoi as Vietnam Integrates with Greater China Economies

A high-profile trip by Chinese President Xi Jinping to Vietnam sets to upgrade political and economic relations, drawing Vietnam into the Greater China economies. Already a destination for many Chinese and Hong Kong companies to relocate downstream manufacturing processes, Vietnam is positioned to further benefit from closer collaboration with Greater China.

There is a synergic partnership between the Chinese and Vietnamese economies, and there has been a high frequency of meetings between the leaders of both sides. Earlier Xi met with Vietnamese President Vo Van Thuong in Beijing for the third Belt and Road Forum for International Cooperation, while General Secretary of the Communist Party of Vietnam Central Committee Nguyen Phu Trong became the first foreign leader to visit China after the 20th CPC National Congress last year.

An important item on the table for this visit by Xi is China’s offer of grants to Vietnam to boost railway between Kunming and the Vietnamese port city of Haiphong, and other transport links from southern China to Hanoi. China is ready to provide “non-refundable aid” for these projects, according to Vietnamese media.

China and Vietnam operate different rail systems meaning cargo needs to be offloaded at the border and loaded onto different trains in Vietnam, slowing down transportation. China’s plan to upgrade Vietnamese railway would greatly enhance logistics efficiency to the benefit of both sides. And this will not be the first transport collaboration between the two nations, Vietnam’s first metro line, the 13-kilometer Cat Linh-Ha Dong route in Hanoi, was built by the China Railway Sixth Group Co and started operation last year.

Vo, at the Belt and Road forum in China in October, emphasized the need to boost cooperation on digital infrastructure, which is the digital Silk Road as part of the larger Belt and Road Initiative, and entails networks of optical fibre cables and data centres that will further help integrate Vietnam’s economy with China’s. These transportation and data links will help Vietnam to attract more businesses and investments.

China remains Vietnam’s largest trading partner, and the second largest contributor of foreign investment in Vietnam; according to data from Vietnamese authorities, direct investment from China to Vietnam reached 19 billion yuan (US$2.69 billion) in the first eight months of 2023 and covered manufacturing, telecommunications and green development.

This trend of investment and economic cooperation is set to continue, driven by the top leadership of both nations. China, due to its geographical proximity, and as a source of capital, technology and technical knowhow, combines well with Vietnam with its rather large pool of educated skilled labor which is at a fraction of the labor cost of China coastal cities.

Political rhetoric from both sides have highlighted “new positioning” and “new level” in bilateral relations, thus there is significant political capital committed towards the upgrade of strategic relations. Investors therefore can rest assured that a conducive and sustainable business environment between Greater China and Vietnam has high-level political support.

Photo source: Chinese Foreign Ministry