At the invitation of Vietnamese Prime Minister Phạm Minh Chính, Chinese Premier Li Qiang made an official visit to Vietnam from October 12 to 14. In a joint statement released by the two countries on the 14th, they emphasized the importance of leveraging the Regional Comprehensive Economic Partnership (RCEP) and the ASEAN-China Free Trade Agreement (ACFTA), utilizing platforms like e-commerce and exhibitions, enhancing customs cooperation, and expanding the export of each country's competitive products to the other.
The Vietnamese government recently issued Decree No. 122 concerning small-scale exports to China to promote long-term sustainable trade development between the two countries. According to this decree, Vietnam will officially cease unofficial-quota exports to China on January 1, 2030, and all import and export activities must be conducted through international ports or major bilateral ports. Additionally, it supplements and revises several provisions regarding trade standards and payment methods, aiming to improve the standardization of border trade between Vietnam and China. It is reported that this resolution will take effect on December 1, 2024.
The Vietnamese government has previously promoted trade with China through cross-border small-scale trade. Such unofficial quota exports refer to a trade method where residents or businesses in border areas conduct small-scale trade by exporting goods in limited quantities to neighboring markets. Over the years, Vietnam's small-scale quota exports to China have been very active, with products mainly including durians, bird's nests, sweet potatoes, dragon fruits, longans, passion fruits, and other agricultural products, as well as shrimps, crabs, salmons, squids, pollocks, cod, and hawthorn fish. However, with the expansion of trade scale and increasing congestion at border ports, the Vietnamese government has begun to gradually tighten relevant policies. The Ministry of Industry and Trade of Vietnam stated that tightening small-scale goods exports aims to bring daily commodity exchanges and sales activities among border residents back on track. This ensures that exports to China comply with international practices, meet quality requirements, and can be traced back to their origin, thereby avoiding the congestion of agricultural products at border ports as seen in the past.
In the short term, the implementation of Vietnam's Decree No. 122 will have a significant impact on the current trade pattern between the two countries, placing adjustment pressures on businesses and individuals that rely on cross-border small-scale trade, as well as on border cities.
According to surveys, Vietnam's regulations on cross-border goods transactions are relatively lenient, especially regarding exports. Therefore, individual traders who do not have business registration can engage in cross-border export activities as long as they reside in border areas, provided they do not involve prohibited export goods. These traders are allowed to create their own lists of goods, which serve as substitutes for contracts, eliminating the need to submit formal export documents such as sales contracts or invoices to customs. The payment methods also demonstrate considerable flexibility, including various forms such as bank transfers, cash transactions, and bartering. As a result, even though certain Vietnamese agricultural products, for instance, various fruits and pork, have not yet received formal import permits from China, these products can still be sold in the Chinese market through small-scale trade quotas among border residents.
Moreover, many traders are leveraging the small-scale quota export method to conduct large-scale trade activities. They do this by establishing lists of regular border residents and pooling their duty-free allowances to import large quantities of goods. Even for products that have already received formal export permits to China (such as cassava products and lychees), there is a tendency to export them through small-scale quotas. For example, Vietnam exports over 3 million tons of cassava starch to China each year, with 60% of that amount exported via small-scale quotas. Although small-scale quota exports account for only a small portion of Vietnam's official total exports to China, they have become an important channel for products that have not yet received formal export permits to China or that do not meet export requirements.
Currently, the new regulations mandate that border residents must be physically present to complete the goods handover procedures, which will undoubtedly increase their participation costs and time expenses. For those accustomed to convenient and flexible trading, this requirement may diminish their enthusiasm for participating in mutual trade, thereby affecting the activity levels of border trade. Border trade not only provides an economic source for residents in border areas but also promotes commercial exchanges and local economic development between Vietnam and China. If the scale of border trade shrinks, the local business environment and residents' income could suffer negative impacts.
Clearly, the mutual trade activities of border residents are being disrupted, which will significantly impact the border trade cities in China. Taking the Dongxing Port in Guangxi as an example, it is the only first-class port in China that connects with Vietnam by land and sea, located just 100 meters from Móng Cái in Vietnam. Previously, Dongxing Port offered convenient services such as self-service customs clearance, allowing both travelers and those engaged in cross-border trade to come and go easily. Dongxing Port sees a high volume of border trade personnel, with its inbound and outbound passenger flow ranking first among land border ports in Guangxi. Such border port cities are significantly affected by the adjustments in Vietnam's border trade policies. In addition to the port cities, other nearby cities reliant on the ports, such as Kunming, Ruili, Pu'er, Wenshan, Baise, and Chongzuo, will also be impacted to varying degrees.
However, from a long-term perspective, the new regulations also provide opportunities for standardization, industrial upgrading, and infrastructure improvement in the Vietnam-China cross-border trade.
Firstly, there is a tightening of payment methods and product standards. Vietnam's Decree No. 122 supplements Decree No. 14 from 2018, explicitly outlining the payment methods for cross-border trade activities. It also introduces Article 4a regarding product standards, requiring that all goods involved in cross-border transactions must meet the legal standards and quality requirements of the importing country. This regulation aims to enhance the traceability and overall quality of traded goods. According to the resolution, the main payment methods for border trade activities include bank payments, settlement payments between exported goods and services and imported goods and services (with any differences settled through bank payments), as well as cash payments. However, under the new regulations, cash payment methods are only applicable to the buying, selling, and exchanging of goods by border residents.
Secondly, Decree No. 122 will focus on promoting the upgrading and structural optimization of industries along Vietnam's border. Specifically, this resolution aims to encourage Vietnamese border enterprises to continually enhance the quality and standards of their products to better meet the growing demand in the Chinese market. Through this process, companies will place greater emphasis on managing production processes and fostering technological innovation, thereby improving overall production efficiency and product quality. This will not only enhance the competitiveness of Vietnamese products in the Chinese market but also drive economic development in border areas, achieving optimization and upgrading of the industrial structure.
In addition, China and Vietnam may further enhance the construction and investment in border ports to adapt to the changes in trade patterns brought about by the new regulations. This includes large-scale improvements and upgrades to the infrastructure of border ports to enhance the customs clearance environment and efficiency. Particularly for specific ports that require centralized processing of import and export procedures, improving customs clearance efficiency and cargo transport capacity is especially important. This will not only facilitate trade between the two countries but also further strengthen economic cooperation and exchanges between them.
Final analysis conclusion:
The recently issued Decree No. 122 by Vietnam will have an impact on Vietnam-China border trade, particularly for border residents, businesses, and cities that rely on small-scale trade, which may face certain adjustment pressures. However, from a long-term perspective, this new regulation will also bring opportunities for standardization, industrial upgrading, and infrastructure improvement in the cross-border trade of both countries.
