The Trung sisters ran off the Chinese. Can Vietnam do it again?
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Facing off against China
Follow America and save the country; follow China and
save the party. This saying, heard everywhere in Vietnam, distills the
geopolitical dilemma facing its ruling Communist Party.
Forty years after the last American troops left Vietnam, the party that
won independence and unified the nation has lost much of its legitimacy.
No amount of harking back to the virtues of Ho Chi Minh and his
comrades can restore its élan nor, it seems, root out systemic
corruption. The regime's biggest liability is its failure to right a
faltering economy. But public opinion is also scornful of its inability
to defend Vietnam's interests against China.
From the perspective of the man in the street in Hanoi or Ho Chi Minh
City, Beijing has thrown off the cloak of "peaceful rise" and reverted
to its historic role of regional bully. Its farcical claim to the marine
and mineral resources of the entire South China Sea is only the most
prominent example. China's construction of a cascade of dams on the
upper Mekong in Yunnan province and support for a plan to build a
further 11 dams downstream in Laos threaten to wipe out the annual flood
surge that sustains the fertility of Vietnam's Mekong Delta region.
Chinese enterprises are also pursuing Laos' mineral and lumber
resources, challenging Vietnamese hegemony in its backyard. In Vietnam
itself, growing investment by Chinese engineering, construction and
mining firms—notably Chinalco's multi-billion dollar bauxite project in
the central highlands—has drawn heavy criticism. Cheap and often shoddy
Chinese goods have flooded Vietnam's markets, crushing local
manufacturers.
The man in the street wants to hit back. It doesn't occur to him that
Vietnam's armed forces are no match for China's or that Vietnam is
highly vulnerable to economic retaliation. Western analysts typically
attribute Chinese "assertiveness" to surging popular nationalism and to
over-zealous security agencies, but to ordinary Vietnamese it is obvious
that Chinese aggression is coordinated in Beijing.
That is nothing new: the grand theme of the nation's history, everyone
learns in school, is dogged and ultimately successful resistance against
invaders. And most of the armies sweeping across Vietnam's borders for
the past 2000 years have been Chinese. There is no reason why it should
be different this time.
Prickly partnership
Vietnam and China share a 1,350-km border and much more. Both
countries are Leninist states with a political culture shaped by
neo-Confucian ideas of merit-based hierarchy and well-tended
relationships. Their ruling Communist Parties have survived by shedding
Marxist economics while nurturing a pervasive state-security apparatus.
Their "socialist market economies" allow vibrant free markets to exist
alongside thousands of state-owned enterprises, which dominate heavy
industry.
Both Beijing and Hanoi are tormented by the lively criticism of
internet-enabled dissidents. These shared cultural and political factors
underpin a web of party-to-party and state-to-state consultations aimed
at sustaining cooperation between the regimes.
Nonetheless, bilateral relations have normally been prickly. China's far
greater geopolitical and economic weight means its relationship with
Vietnam is fundamentally unequal. When Chinese people pay attention to
Vietnam at all, they often regard it as a willful province that somehow
slipped loose from its moorings.
Conversely, Vietnam's 90 million residents are always uncomfortably
aware of their northern neighbors, who are 15 times more numerous and
whose economy is 50 times larger. Yet the Vietnamese will not kowtow to
Beijing when territorial integrity is at stake. Ho Chi Minh excepted,
their greatest heroes are generals who forced dynasty after dynasty of
Chinese invaders to withdraw. As recently as 1979, some 20,000 Chinese
soldiers died when Deng Xiaoping sought to "teach Vietnam a lesson" for
toppling Beijing's Maoist protégés in Cambodia and forging an alliance
with the Soviet Union.
By the mid-1990s, China and Vietnam had slipped back into a relatively
comfortable relationship. Both nations were preoccupied by internal
economic reform, the Soviet Union had disintegrated, and China was
advertising its "peaceful rise" to the Association of Southeast Asian
Nations (Asean), which now included Vietnam.
Bilateral trade was expanding, there was discussion of upgrading "trade
corridors" from landlocked southwest China to Vietnamese ports, and
negotiations to demarcate the land border were progressing well. Even
the rival claims to ownership of the reefs, rocks and shoals of the
South China Sea seemed under good management, if no closer to solution.
All that changed, however, in 2009. Whether by design or diplomatic
mishap, China was no longer content to leave the overlapping claims on
the shelf. In May that year, China presented a crude map at the United
Nations claiming "indisputable sovereignty" over 80 percent of the South
China Sea.
Tensions escalated sharply thereafter, drawing in non-regional
nations—including the United States—and challenging Asean cohesion.
Vietnam and the Philippines have borne the brunt of the Chinese drive to
create "facts" that, although incompatible with international law, are
difficult to rebut. Nationalist passions are boiling in all three
nations, threatening armed skirmishes at sea. Hanoi's policy of
deferring to China is in tatters.
Many of Vietnam's non-party elite, as well as some within the party
itself, believe the solution is to seek a de facto economic and military
alliance with the US. Yet senior members of the party remain highly
skeptical of US intentions, viewing themselves as locked in an
existential conflict with Western liberalism, capitalism and
imperialism. They have yielded only grudgingly to reforms aimed at
establishing the nation's global economic competitiveness and engaging
the US as a counterbalance to China.
Party stalwarts gag on American demands that Vietnam allow greater
democratic freedoms, fearing that Washington's true objective is to
bring down the Communist regime. For all the recent frictions, they do
not believe China's leaders will betray a ruling Communist Party so like
their own.
Still waiting for a free lunch
In truth, China these days cares a lot less about helping its
fellow Communists cling to power than it does about exploiting regional
resources and extending its economic tentacles. With a sackful of export
credits and eligibility for concessional loans from state-owned banks,
Chinese firms have become major players in infrastructure development in
Vietnam, particularly construction of thermal power plants.
Saigon's Chinese--going, going, gone
When the Vietnam War finally ended in 1975, roughly 4 percent of
Vietnam's population was of Chinese extraction. Perhaps 1.5 million were
citizens of the defeated southern regime, of whom more than half lived
in Cholon, Saigon's Chinese quarter. Only around 300,000 lived in the
victorious northern half of the country.
Vietnam's Chinese community had prospered over
the years. Merchants of Chinese origin monopolized wholesale trade in
the south and dominated manufacturing and retail trade. The descendants
of refugees from the collapsing Ming dynasty, who settled in Vietnam in
the mid-17th century, were substantially assimilated. Yet the majority,
offspring of much more recent migrants, maintained their regional
Chinese cultures. As in many other parts of Southeast Asia, their
outsider status and economic success created resentment among locals.
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By and large the Chinese firms are not squeezing out
Vietnamese contractors, instead grabbing business from Japanese, South
Korean, US or European competitors by entering bottom-dollar bids. But
critics accuse Chinese enterprises of employing their own countrymen and
producing work of low quality, with frequent missed deadlines and cost
overruns. Vietnamese security hawks further assert that dependence on
Chinese contractors in strategic sectors like energy undermines national
security.
Another bone of contention is Vietnam's mounting trade deficit with
China, its largest trading partner, which economist Tran Van Tho calls
an "industrial tsunami." Vietnam's trade with the other nine Asean
countries and with Japan is roughly balanced, and it has a huge surplus
with the European Union and the US. But with China it ran a US$16.4
billion deficit in 2012, giving China a bilateral trade surplus of 40
percent.
The bulk of Chinese exports are intermediate goods for assembly in
Vietnam's export processing plants: fabric, zippers, buttons, wires,
circuit boards, and assorted widgets. But China also provides more
expensive capital goods—machinery to equip Vietnam's factories and build
infrastructure.
A third and very visible component is consumer goods, priced to undercut
domestic competitors. Vietnamese newspapers regularly feature stories
alleging that China dumps dangerous or shoddy goods, and provocative
moves by Beijing in the South China Sea reflexively result in calls to
boycott Chinese wares.
It wasn't meant to be this way. According to economists' predictions,
Vietnam should be eating Guangdong's lunch by now. With its much lower
labor costs, Vietnam was the logical destination for factories from
China's export-processing center migrating to cheaper climes. The
labor-intensive garment and footwear industries have long accounted for
about 20 percent of Vietnam's exports; they got their start in the 1990s
when China's garment and footwear exports were capped under EU and US
quota schemes.
Yet labor productivity remains low, real wages rose at 10 percent a year
in 2006-11, and Vietnam has largely failed to lure manufacturers from
their bases in China. As labor costs continue to rise in both China and
Vietnam, factories are migrating instead to Cambodia, Bangladesh and
even Myanmar.
It is not all bad news. As the global economy slowly recovers, Vietnam's
foreign-invested sector is growing once again. Rather than shifting
factories from China, some multinationals and their contractors have
diversified their manufacturing bases by opening additional plants in
Vietnam. Anecdotal evidence suggests a pronounced trend toward higher
quality investments, which can benefit from substantial tax breaks.
Firms establishing or expanding assembly plants include household names
like Canon, Samsung, Intel and IBM, Hitachi, Panasonic and Nokia. Yet
nearly all the inputs to Vietnam's manufactured exports are imported,
some from China. All that is added in Vietnam, typically, is
labor—something China can do more efficiently and on a much larger
scale.
Comprehensive strategic blunder
In 2008, capping a warmer phase in relations, Chinese party
chief Hu Jintao and his Vietnamese counterpart, Nong Duc Manh, declared a
bilateral "comprehensive strategic cooperative relationship." And if
China is truly interested in nurturing a special relationship with
Vietnam - and thereby strengthening its diplomatic muscle in Southeast
Asia - Beijing is in a position to help.
Although Vietnam's rulers admit to no anxiety over the bilateral trade
imbalance, it is nevertheless a chronic political liability. China
imports plenty of rubber, coal, oil, lumber and agricultural products,
but is uninterested in Vietnam's industrial goods. Friendly moves to
pump up industrial imports would cost China little and be very good news
for Hanoi.
Above all, a sincere proposal for joint development of mineral resources
and co-management of fish stocks in the disputed area of the South
China Sea could be a game-changer—both for relations with Vietnam and
with Asean.
Yet the reality is that the relationship between Beijing and Hanoi has
become dangerously unstable since the agreement in 2008. Chinese
pressure on political and strategic issues has boxed in Vietnam's
leaders, arguably threatening their survival. Beijing has bolstered its
standing among Chinese nationalists by flexing its muscle in the South
China Sea, while Hanoi's ineffectual attempts to fend off Chinese
provocations have steadily eroded its position among nationalists at
home.
Short of armed conflict, it is hard to imagine what more China could do
to hasten the downfall of its would-be friends and ideological allies in
the world's only other "market socialist" regime. In all probability,
this would bring in new leaders looking to cozy up to the US - an
entirely self-defeating result.
More worrying, an armed conflict between is not out of the question.
China has vastly more firepower than Vietnam, but Hanoi is ramping up
its air and sea deterrent capabilities. If pressed against a wall,
history suggests that the Vietnamese will hit back. A miscalculation by
either side could result in a clash. This would be sharp and bloody,
with unpredictable consequences. China can continue playing the bully -
but it is playing with fire.
(David Brown is a retired diplomat and
regular contributor to Asia Sentinel. He wrote this for the Hong
Kong-based Gavekal Dragonomics' China Economic Quarterly.) |
