China–Vietnam relations: past sovereignty and sea
7 Oct 2016|

Geopolitics is often seen through a telescopic lens: with intense focus in one spot with the rest entirely out of view. That often seems to happen to nations’ relations with China. The US and China are a good example. Much of the conventional wisdom says that they’re competing for hegemony in Southeast Asia and, if you listen to Donald Trump, over trade.

In Australia too, we constantly worry about a conflict between our security and economic interests. The China–US relationship is multi-dimensional, and it’s not all downside. There’s also a high level of economic interdependence between the US and China, as well as collaboration on problems like climate change.

Similarly, Vietnam–China relations occupy a complicated world far larger than South China Sea (SCS) disputes. They share a comprehensive strategic partnership (actually a ‘comprehensive strategic cooperative partnership‘) and there are many areas of, well, cooperation. Most recently, Vietnam struck a deal with China’s security ministry for increased cooperation on cybercrime, border crime and human trafficking (a serious issue). China’s long helped with the training of many of Vietnam’s security cadres and Vietnam also often looks to China when it comes to domestic security, with a political tinge like dealing with dissidents or internet-based dissent.

That’s to be expected between communist neighbours, as is trade. Two-way trade may be US$100 billion by year’s end (compared with US$4 billion for Vietnam and Russia). Vietnam’s now China’s biggest trade partner within ASEAN, after not long ago overtaking Malaysia. So, there’s some strong economic interdependence despite the SCS sovereignty issues.

But within that figure there’s a huge deficit for Vietnam, with China having by far the lion’s share of exports. The trade deficit’s been an economic and political worry for Vietnam for some years. The issue can become politicised at times, such as ‘Buy Vietnamese’ campaigns after sovereignty disputes flare or worries that economic dependence on China will undermine state sovereignty. (The Vietnamese press will go after the poison-food-from-China angle and even simple Bubble Tea isn’t immune.) Vietnam’s trade deficit with China is offset by a strong surplus with the US, and the EU. It’s also a reason Vietnam’s been so keen for the Trans-Pacific Partnership.

China’s made clear that it values the trade relationship and wants to increase foreign direct investment and overseas development aid (ODA) into Vietnam. Many of the 12 agreements signed during Xi Jinping’s November visit involved ODA, including the building of hospitals and schools. Chinese investment remains fraught in Vietnam and is often viewed with suspicion by the public. The best current example is the Cat Linh–Ha Dong railway in Hanoi; its Chinese builders China Railway Sixth Group is far behind the scheduled completion date. As elsewhere, the use of Chinese workers on projects in Vietnam is a problem at times, and has been on and off for some years.

During his mid-September visit to China, Prime Minister Nguyen Xuan Phuc publicly scolded the company. One transport expert quoted in local Vietnamese news suggested that Vietnam should entrust such projects to more experienced nations like Japan. (Japan’s still Vietnam’s biggest ODA giver, with much of its money going to infrastructure projects.)

Anti-Chinese sentiment can run strong at times in Vietnam, and keeping it under control is important for the government. It flares up mostly over SCS issues, the worst example being in 2014 with the HYSY 981 oil rig fiasco, which not only sent protesters out into the streets, but also ended with factories being burned (though they were Taiwanese). There’s suspicion of China, especially near its northern border, but it only becomes a serious flashpoint at times of crisis.

In fact, the visit to Beijing by PM Phuc in mid-September had a very large trade and investment angle. Though ostensibly it was another trip to reaffirm traditional friendship (with a spiffing big Vietnamese delegation of 132), much of the time was taken up with trade and investment talks. Phuc visited the Guangxi autonomous zone and met with the heads of Chinese banks (you can read a full rundown here).

That was Phuc’s first visit to China since taking office this year after the 12th National Congress. Though it’s seen as significant, he visited Russia and Japan first, as well as attending the ASEAN meeting in Laos. Former PM Nguyen Tan Dung took two years to get to China, and was often (accurately) seen as a hardliner on the nation, ‘standing up’ when Vietnam’s sovereignty was threatened. Dung also saw the value of better relations with the US, including economic integration. However, he was a fan of Chinese investment, and his support of Chinese-run bauxite mines in Vietnam’s delicate central highlands almost brought him undone.

I wrote here recently about China coming between old friends Vietnam and Russia. Meanwhile at Lowy, I wrote about Indian PM Narendra Modi’s visit to Hanoi and the upgrading of ties to the highest level of a comprehensive strategic partnership,  making India only the third such partner (alongside with China and Russia). President Duterte of the Philippines visited last week. That level of activity is symptomatic of Vietnam’s efforts over the past decade, which has seen Vietnam truly broaden its diplomatic reach, and expand its trade network, including a recent free trade agreement with the Eurasian Economic Union. Within that expanded framework China remains a fellow traveller and fellow trader, despite the strain the SCS dispute puts on things.