Friday, 9 May 2014

Random Thoughts About China, Vietnam And The World

I do not usually like to touch on politics. However, politics and economics are very much linked together. A wise policy implemented at the right time can grow the economy while a poor policy established at the wrong time threatens the country's economy. Today, I would like to touch on my personal feelings about China after reading about Chinese ships provoking Vietnamese vessels to drill oil in the South China Sea (

Before I delve into the topic at hand, I would just like to offer my honest opinions on
Vietnam. Vietnam is currently the 4th largest potential market in South East Asia, with over 90 million citizens. However, the country is declining at a fast rate. The core of the country is rotten and values are not inculcated rightly. Vietnam has the potential to be a huge economy if the right policies are adopted but its rampant corruption and severe income inequality issues continue to destroy the country's potential. In 2013, the per capita income of Vietnam stands at USD$2000, an embarrassing figure for its huge potential. To put things into perspectives, its per capita income is close to some countries in Africa! In the times of the Vietnam War, when great generals like Ho Chi Minh and Vo Nguyen Giap stood against the Americans, the sky was literally the limit when they won against the United States. However, decades of hedonistic indulgences has not moved the country forward. Please do not feel that I am against Vietnam or look down on Vietnamese. In fact, I love the country and its culture, but feel saddened by the continuous erosion of the country's potential by its government. I even learnt the language in my first year during university as I felt there was much potential for this country, studying hard enough to score an A. 

Now, why have I touched on this before going into the above topic? It is a very sad fact that as a communist country, Vietnam is unlikely to receive support from global superpowers like the US and other European superpowers like UK and Germany. Add to that the Ukraine crisis and you know that the various superpowers have their plates too full. Moreover, its severe poverty has led to a weak military force that is completely incomparable to China, where more and more reserves are currently being diverted to further develop its military might. The Vietnamese government have been taunted for days and yet no appropriate response has been sent from Hanoi. This is clearly an act of bullying and the national pride of Vietnam is at stake here. From this incident, I gained renewed respect for the Singapore government as the Singapore government was stern in its approach towards the haze incident last year and the naming of ships incident this year.  

Now where do I see things going forward? ASEAN. If the Vietnamese government is able to leverage on ASEAN to put pressure on China, the dispute might have a peaceful ending. However, any weakness on the part of the Vietnamese government will put a stain on its national identity. Most governments which have adopted the right policies have been able to move out of a manufacturing economy after some decades. Japan, Singapore, Hong Kong are some examples of successful transition. Yet, Vietnam remains a predominantly manufacturing economy.

Now where does the global economy fits into this picture? Firstly, if China is able to gain control of the South China Sea, it will become a major oil producer. This will give it unprecedented economic strength as huge reserves are expected to lie under the South China Sea. Next, China's strong current account surplus and huge foreign reserves gives it flexibility in gaining a stronger foothold on the global economy. In addition, its undervalued Yuan continues to offer it competitive edge in further growing its economy, giving it the best of both a knowledge based economy in certain cities like Shanghai and a manufacturing economy in other cities. Moreover, China is expected to become the largest economy in 2014, displacing US. 

Moving on, we know that China is getting increasingly assertive in their behaviours. There is really no knowing what China will next try to assert against if the taunt against the Vietnamese government goes unchallenged. The Philippines government has made a tough stance by detaining Chinese ships, which I felt was a clear message to China that they cannot be played with. Japan has ramped up its defences near the Diao Yu/Senkaku islands. Now, can Vietnam stand against China?

The fact is, in light of the global recovery, political issues in the region threatens the regional economy, and hence its recovery. However, I do doubt the possibility of a war as a war does not benefit any parties, but the threat of war is very real. However, as I am not a politician, my takeaway from this whole saga is to continue to invest prudently and steadily.

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