Vietnam has a complicated history of relations with both the US and China. It is impossible not to reckon with such major geopolitical actors as the United States and China, and the Vietnamese government realizes this.
That is why Vietnam cooperates with both countries. For example, the US and its closest partners are paying more and more attention to Vietnam every year. Despite the fact that exports of goods from Vietnam to America fell by 10.3% in 2023, the United States is still the largest export market for Vietnam (the U.S. accounts for about 42% of Vietnam’s exports), and the top 5 export markets traditionally include Japan and the Republic of Korea, which are America’s allies in the region.[i]
In addition, the US and Vietnam have a free trade agreement. Also the above mentioned states make investments in Vietnam. All developed countries and large corporations in one way or another try to move their production to economically and socially less developed countries, Vietnam is no exception. Vietnam has a relatively large, well-educated labor force compared to many other regional competitors in Southeast Asia, making it an attractive center for industrial production by multinational corporations. In addition, Vietnam benefits from relatively low industrial wage costs, for example compared to coastal Chinese provinces, where industrial wages have risen rapidly over the past decade. That is why Vietnam is so popular for other countries and their companies, for example, Samsung opened its production there back in 2008,[ii] and now about half of their equipment is produced in Vietnam.
Also Intel, Toyota, Nike, Adidas, P&G have their production in Vietnam. Speaking of the United States, Intel’s investment in Vietnam is an example of how American technology companies use the country’s skilled labor force and favorable business environment for manufacturing operations. Such investments contribute to the economic development of both Vietnam and the US and strengthen bilateral ties. However, it is worth noting that there are times of disagreement between foreign companies and Vietnam. For example, Intel recently postponed a previously planned new investment in manufacturing in Vietnam, the company attributed this to excessive bureaucracy and unstable electricity supply.[iii] However, do not think that investment in Vietnam will stop, despite all the problems Vietnam has a favorable geographical location, skilled labor force and most importantly has no direct competitors in the region. Such problems allow Vietnam to work on its mistakes and get resources from China, which is a competitor of the United States.
When discussing China’s relations with Vietnam, it is worth noting that despite past conflicts, the two countries have close cooperation. China started to make its first steps in Vietnam back in 1991, then in a couple of years China launched 110 small investment projects, but over time the scale and forms of cooperation have changed, and since 2016 Vietnam is the largest trading partner in ASEAN for China. When it comes to investment, for example in 2022, China invested about 2.52 billion dollars in 283 new projects in Vietnam, ranking 4th among all countries.[iv] In 2023, the amount of investment increased even more.
It is worth noting that Chinese companies are also represented in Vietnam, such as: Huawei; ZTE Corporation; China Construction Bank (Chinese banks, including China Construction Bank, have opened branches in Vietnam, providing financial services and investment activities); China Southern Power Grid (a state-owned energy company from China, which is active in the energy sector in Vietnam); BYD Company Limited. Not to forget the influence of the Chinese diaspora (as they are also called Huaxiao) in Vietnam. Actively participating in the national economy, Huaqiao has small and medium-sized enterprises and significant financial resources.
Xi Jinping’s visit to the country, where he met with Nguyen Phu Trong, General Secretary of the Communist Party of Vietnam, in December 2023, attests to Vietnam’s importance to the PRC.[v] The main purpose of the trip was to bring the country into the “Community of Common Destiny” – a largely symbolic concept of Chinese foreign policy formulated as a counterweight to the “U.S.-centric world order.” During the visit, assistance in modernizing railroads was discussed, including the construction of a line from southern China to the Vietnamese port of Haiphong. The branch line could pass through a Vietnamese region with deposits of rare earth metals. China – is the world’s largest producer of these metals, needed, among other things, in the production of solar panels and batteries for electric cars. In this way, China wants to get ahead of America and increase its influence in the country, which is not easy to do. Beijing has problems with Vietnam, the main problem being the so-called “Nine Dash Line”.
Although economic interests are listed, there are other reasons for the US and China’s struggle over Vietnam. If we look at geography and history, Vietnam has a convenient location and borders China’s southern border, and it is also convenient to control maritime trade routes through the South China Sea from Vietnam. Once it was easy for the West to weaken the Qing Empire of China by controlling Korea and Vietnam, and then to expand and divide the territory of China between France, Britain, Germany and Russia. In the confrontation with China at all times the territory of Vietnam is of key importance, because it will allow not only to “cut off” logistics and trade routes, but also, if necessary, to fight on land and sea. In the context of a possible US-China conflict, America and its allies are paying great attention to defense in the Asia-Pacific region. This is evidenced by the U.S. allocation of $886 billion for defense in the region, which provides for increased defense capabilities and military exercises, including those aimed at deterring China.[vi]
Japan, as America’s main ally in the region, has not been left behind. Japanese Prime Minister Fumio Kishida and Vietnamese President Vo Van Thuong held talks in Tokyo and agreed to expand security cooperation, work on the transfer of defense equipment and technology, and begin discussing a new Japanese aid program for the militaries of developing countries in the region.[vii] The U.S. is actively working on Vietnam, as evidenced by Biden’s personal visit to Vietnam in 2023 to raise the level of relations to a “comprehensive strategic partnership.
And how is Vietnam involved in all this? At first glance, it may seem that Vietnam is some valuable and passive territory that cannot be divided by big geopolitical actors. However, it is not so, although Vietnam is weaker than both states, but it benefits from their confrontation, not seeking to unequivocally take sides. The basis of Vietnam’s foreign policy is multi-vectorism or “Bamboo Diplomacy”. It means strong roots (national identity), like bamboo, and many different “offshoots”, i.e. adaptability and flexibility of diplomacy. Vietnam is trying to balance between China and America, so it can take dividends for itself from both countries. Speaking of Hanoi’s northern neighbor, firstly, cooperation with China can help to gain even more benefits. Secondly, Vietnam is certainly looking to increase trade engagement with Beijing, after all it is the biggest player in the region. Also, friendship with such a “communist” regime can serve as a source of stability for the state.
On the other hand, Vietnam is aware of the possibilities of cooperation with the United States and its allies. In general, we can conclude that Vietnam’s foreign policy will be characterized by multi-vectorism in the future. In short, Vietnam is likely to benefit the most by relying on “bamboo diplomacy.”
[i] “Vietnam”, TrendEconomy, https://trendeconomy.com/data/h2/Vietnam/TOTAL, (Date of Accession: 26.12.2023).
[ii] “Where are Samsung’s Factories in Vietnam?”, Vietnam Briefing, https://www.vietnam-briefing.com/news/where-are-samsungs-factories-in-vietnam.html/, (Date of Accession: 08.02.2023).
[iii] “Intel Backs Out of Planned Vietnam Chip Expansion”, The Diplomat, https://thediplomat.com/2023/11/intel-backs-out-of-planned-vietnam-chip-expansion-report-claims/, (Date of Accession: 09.10.2023).
[iv] “Vietnam and China”, viettonkin consulting, https://t.ly/hpYRa, (Date of Accession: 20.07.2023).
[v] “Xi Jinping in Vietnam to rekindle a love-hate relationship”, BBC, https://www.bbc.com/news/world-asia-67678890, (Date of Accession: 11.12.2023).
[vi] “Biden signs $886bn defense bill to boost Indo-Pacific deterrence”, NikkeiAsia, https://asia.nikkei.com/Politics/International-relations/Indo-Pacific/Biden-signs-886bn-defense-bill-to-boost-Indo-Pacific-deterrence, (Date of Accession: 23.12.2023).
[vii] “Japan and Vietnam agree to deepen security cooperation”, The Japan Times, https://www.japantimes.co.jp/news/2023/11/27/japan/japan-vietnam-security-cooperation/, (Date of Accession: 27.11.2023).
