Vietnam's 8% Growth Surpasses China, Steals Orders Amid Foreign Capital Flight and Dollar Harvest Fears
On the last day of 2022, Vietnam News Agency in Vietnam couldn't wait to announce to the whole world that Vietnam's economic growth has reached 8.02%. It is quite clear that Vietnam's economic growth rate has far exceeded that of China. Over the years, ordinary manufacturing industries such as shoes, hats, bags, and suitcases, as well as high-tech manufacturing industries such as Apple or other smartphones, Vietnam has successfully taken a lot of orders from China. However, behind Vietnam's dazzling economic data, there is a large amount of foreign capital fleeing from Vietnam, and production orders are plummeting. If not careful, Vietnam may be harvested by the US dollar.
01, Economic Miracle
On the last day of 2022, Vietnam News Agency published a report, announcing in advance the GDP growth rate of Vietnam for the entire year of 2022. The original target was 6% to 6.5%, but it seems that the annual growth will reach 8.02%. Although the final data for the fourth quarter has not yet come out, Vietnam's GDP grew by as much as 13.7% year-on-year in the third quarter, so it is very likely that the annual growth rate will reach 8%. On the other hand, Vietnam is still continuously utilizing foreign capital. This year's foreign investment has reached 27.7 billion US dollars, with a growth rate of 13.5% compared to last year, which is also the peak of Vietnam's utilization of foreign capital in the past five years. In fact, Vietnam's development in recent years is closely related to foreign capital. Due to the continuous over-issuance of currency by the United States, causing the overflow of US dollars, a lot of funds have entered Vietnam, including entering Vietnam's manufacturing industry, as well as Vietnam's real estate and stock market.This has also led to an unprecedented boom in Vietnam's manufacturing industry, with Vietnam's housing prices even ranking among the top in Asia in the first half of this year. However, this has also sown hidden dangers for Vietnam's economy.
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02. Flight of Foreign Capital
The United States has turned off the tap and stopped the printing press. Although the amount of foreign investment in Vietnam this year is at its peak, it may also be the last twilight. Data provided by the Vietnamese authorities show that since the U.S. interest rate hike in March this year, foreign capital has been continuously selling off Vietnam's financial assets, with an outflow of funds reaching 1,400 trillion Vietnamese dong by the end of November.
The continuous outflow of funds from financial assets is also happening in Vietnam's real estate, especially since the third quarter of this year when the Vietnamese regulatory authorities imposed strong regulation on the real estate sector, further accelerating the outflow of funds from real estate. For the Vietnamese government, this is a necessary measure to curb the rapid increase in housing prices. However, for the entire national economy, the outflow of funds is very likely to cause a collapse in Vietnam's real estate market.
03. Dollar Harvesting
Moreover, the continuous interest rate hikes by the United States have also severely affected Vietnam's real economy from another aspect, namely the manufacturing industry that Vietnam takes pride in. Previously, Vietnam's manufacturing has taken a significant share of manufacturing from China. Some well-known international brands, such as Nike and Adidas, have moved most of their production lines from China to Vietnam several years ago, and in recent years, Apple has also set up some production of its mobile phones and music players in Vietnam.Therefore, many foreign media reports believe that Vietnam is taking over the title of the world's factory from China.
However, due to the continuous interest rate hikes in the United States this year, the economic growth rate of the United States has slowed down significantly, and it is not ruled out that it may enter a recession. As a result, orders from the United States and other Western countries have decreased significantly, leading to a shortage of orders in Vietnam's manufacturing industry.
Data released by a U.S. research company shows that since October this year, the United States has changed its habit of placing a large number of orders before the peak sales season in previous years, and the import of toys, clothing, and other goods from Asia has decreased significantly, leading to a large reduction in containers at U.S. ports.
Among them, the reduction in sports goods and toys is nearly half year-on-year, clothing has decreased by nearly 40%, and shoes have decreased by 20%. Many of the reduced orders were originally provided to Vietnamese factories.
Due to the loss of confidence in the future economic prospects, Vietnam's stock market has experienced a significant decline since March this year, with the highest point exceeding 1,500 points, but the lowest point is less than 900 points. Even though there has been a slight rebound during this period, it has still fallen by nearly one-third.
Obviously, this is not the final outcome yet. If not careful, the dollar's harvest will continue.
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