New trade deals are luring businesses away from the country’s leading trade partner.
Vietnamese businesses are depending less on the Chinese market and looking more to Japan and South Korea, according to a press statement released by HSBC on Thursday.
China remains the most important market for Vietnam, with 39 percent of local businesses considering the northern neighbor their top partner, HSBC said in its report, titled: ‘Navigator: Now, next and how for business.’
However, Vietnamese firms are also gravitating towards Japan and South Korea, the report, which surveyed 6,000 businesses across the globe, said.
Japan and South Korea round up the top three as the top trading partners for 29 and 24 percent of Vietnamese businesses.
According to economists, the shift from China to Japan is partly due to the signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) between 11 countries back in March, which includes Vietnam and Japan.
The new agreement will reduce tariffs in countries that together amount to more than 13 percent of the global economy.
Japan’s Economy Minister Toshimitsu Motegi said that the agreement would be an “engine to overcome protectionism” emerging in parts of the world.
South Korea is also a prime target for Vietnamese firms during the shift, considering how trade between Vietnam and South Korea has risen rapidly since a free trade agreement took effect in December 2015.
The two countries pledged to boost bilateral trade to $100 billion by 2020, or 50 percent more than last year, in a memorandum of understanding signed during a visit to Hanoi by South Korean President Moon Jae-in last month. The memorandum also laid out guidelines to reduce Vietnam’s bilateral trade deficit.
“Overall, companies are showing remarkable agility in navigating the changing trade policy landscape. They are getting on with adapting business plans and relationships, to participate in shifting supply chain,” said Noel Quinn, Chief Executive of Global Commercial Banking HSBC.
The survey also shows that Vietnamese firms are optimistic about future trade, with 90 percent of them expressing confidence for the next 12 months. Over a third of them cited a conducive economic environment, heightened demand and lower labor and logistics costs as reasons for their outlook, according to HSBC.
Pham Hong Hai, director of HSBC Vietnam, said Vietnam has the potential to capture commercial and investment opportunities, but businesses need to build strategies to develop their supply chains, apply modern technologies and cooperate with both domestic and international firms to ride this trend.
China remains Vietnam’s biggest trading partner, with trading value reaching $93.7 billion in 2017, according to Vietnam Customs. South Korea overtook the U.S. to claim second place as trading value surged 41.3 percent last year to $61.6 billion. Meanwhile, Japan came sixth with trading value of $33.4 billion.