Is Vietnam really a “currency manipulator” as the US government has imposed?

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to Bloomberg, the global index “Chai Latte” by Versus or the official indexes proposed by the IMF

and countries, the “real exchange rate” between currencies often has a large difference. It is very difficult, if not impossible, to value one coin’s true value higher or lower than another.

In other words, the US Treasury Department’s use of the above three criteria to identify a

“currency manipulator” lacks a solid scientific basis and has not entered the essence of the problem.

The logic between the three given criteria and “currency manipulation” is almost non-existent.

Second, from a practical point of view, rightly or wrongly, the US government is only an executive agency and the US Treasury Department makes reports on the basis of strict compliance with domestic laws. This is evident in all previous reports that can be found on the US Treasury Department website. Those responsible for the preparation of the report adhere to a basic outline framework, with unified criteria and a transparent status quo assessment.

With the 3 criteria mentioned, at least within the last 5 years when a country “satisfies” two of the three criteria mentioned above is put on the watch list and when it “satisfies” all three criteria, it is put on the watch list. on the “currency manipulator” list. Although the label “currency manipulation” does not reflect the true meaning of the term, the nature of the act of “labeling” in the report is a purely technical manipulation in this case.

In other words, the fact that Vietnam is on the list of “currency manipulators” in the report at the end of 2020 is not necessarily a less positive signal in the increasingly good diplomatic relations between Vietnam and the United States. , as well as former President Trump’s personal interest in Vietnam.

Thus, judgments and doubts about potential factors related to political conflicts can be excluded when the US “labels” Vietnam as a currency manipulator, but it is only a technical issue.

and purely economic needs to be prioritized to research and solve.

in which, the US Department of Treasury has put on the Monitoring List of 10 economies: China, Japan, Korea, Germany, Italy, Singapore, Malaysia, Taiwan (China), Thailand and India . At the same time, Vietnam and Switzerland were identified by the US Department of Finance as currency manipulators?

The problem is that: with Vietnam, in semi-annual reports (from May 2019 to June 2020), Vietnam has twice been put on the supervision list by the US Department of Finance. By December 16 (at the December 2020 report for the review period from July 2019 to June 2020), and this is the third time, the US Department of Finance has identified Vietnam as a currency manipulator because Vietnam has met and exceeded all three criteria mentioned above.

However, in fact, Vietnam is not a currency manipulator as the US side has “labeled”, but this is a subjective and unilateral action on the part of the US Department of Finance and they have not recognized it. multidimensional, not taking into account the characteristics of the Vietnamese economy as well as the recommendations of international organizations (such as the World

Bank-WB, the International Monetary Fund-IMF) for Vietnam. Vietnam is a fast-growing, highly open economy and it is necessary to have tools (in line with international practices) for sustainable, safe economic development, which is resistant to severe impacts. shock from the outside. In fact, in the Report dated January 14, 2020, the US Department of Finance continued to put Vietnam on a monitoring list that only met a single criterion of a bilateral goods trade surplus with the United States. The period was 47 billion USD, and the current account surplus was only 1.7% of GDP; net buying intervention in the foreign currency market is equivalent to only 0.8% of GDP.

Vietnam does not manipulate currency as the US side has “labeled” for the following reasons:

First, Vietnam does not advocate currency devaluation, both in official statements and in actual operating instructions. The management of the exchange rate in recent years by the Government of Vietnam within the framework of the common monetary policy aims to achieve the consistent goal of controlling inflation and stabilizing the macro-economy, not to create a competitive advantage in trade. international unfairness.

Over the past years, Vietnam has implemented a central exchange rate policy within the framework of a common monetary policy with the consistent goal of controlling inflation and stabilizing the macro-economy, not creating a competitive advantage in trade. international unfairness. The central rate of VND/USD at the end of the year usually does not exceed 1.5-2 % compared to the beginning of the year, despite the drastic fluctuations in the exchange rate of many regional and international currencies, even the USD. Specifically, since 2016 until now, the State Bank has implemented a mechanism to control the exchange rate according to the fluctuations of the currency basket of countries with great economic relations with Vietnam. The proactive and flexible exchange rate management policy along with a prudent fiscal policy (control of public debt and budget deficit) have helped stabilize Vietnam’s macro-economy in the 2016-2020 period.

will reject the assessment of the US Department of Finance because in 3 years (2017-2019), the real value of VND as calculated by Dr. Can Van Luc and his associates increased by about 2.6%. Accordingly, Vietnam’s trade balance with the US may be negatively affected due to the appreciation of the VND against the USD in the three years 2017-2019, not necessarily creating an export advantage for Vietnam. Therefore, the US Department of Finance’s assertion that the

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undervalued VND creates an export advantage for Vietnam is unfounded and needs to be carefully and accurately considered.

Moreover, Vietnam has no incentive to devalue its currency for export advantages, because exports and trade surpluses are mainly due to FDI companies in Vietnam being the main and main beneficiary, while domestic enterprises. countries often have a trade deficit. Moreover, Vietnam also does not benefit from devaluation due to its high dependence on imported input materials and high government debt.

Second, Vietnam does not intervene one way in the foreign exchange market.

It should be affirmed that, in recent years, the purchase of foreign currency by the State Bank is essentially the process of converting foreign currency into VND from investors, exporters and remittance recipients, to ensure foreign currency holders shall not use foreign currency as a means of domestic payment. This activity is in accordance with the provisions of Vietnamese law, as well as the practice like many other countries.

The purchase of foreign currency by the State Bank of Vietnam also aims to ensure the smooth operation of the foreign currency market in the context of an abundant foreign currency supply, contributing to stabilizing the macro economy and consolidating the State’s foreign exchange reserves. capital is low (currently only meeting about 3.5 months of import) compared to other countries in the region, as well as compared with general recommendations and practices (need to meet about 5 months of import), much lower compared with 5 months of imports of Singapore, 8 months of the Philippines, South Korea or 9 months of Thailand and 14 months of China, to enhance national monetary and financial security. From a crisis control perspective, increasing foreign exchange hoarding through the purchase of US dollars - the currency used mainly in Vietnam’s international reserves and payments is a typical crisis prevention move. form in conducting the monetary policy of any country.

Besides, in recent years, the average inflation of Vietnam is 4% while the inflation of the US is less than 2%, so it is normal for the dong to depreciate by 1-1.5%; Vietnam has many years of high inflation 5-6%, but VND only depreciated 1-2%. In other words, the purchase of foreign currency by the State Bank of Vietnam is to perform the function of converting foreign currencies to help people in Vietnam’s territory use the dong, which means that this purchase is mandatory. Moreover, Vietnam not only buys foreign currency one way, but in fact, the State Bank only buys when there is a surplus of foreign currency in the market; at the same time, the State Bank always actively sells to stabilize the VND/USD exchange rate and maintain the target macroeconomic status.

In addition, the current account surplus in Vietnam (including trade balance and remittances) is usually mainly due to remittances from abroad. These are remittances from overseas Vietnamese to support their relatives in the country. Remittance is an objective factor, not because the exchange rate is high or low. Moreover, for many years now, Vietnam has lowered the USD deposit rate of both individuals and organizations and businesses by 0%, so the exchange rate is not a factor causing the current account surplus to exceed the US criteria. The specified period is 2% of GDP. In other words, Vietnam’s current account surplus is largely due to remittances from abroad. If excluding the annual remittance, Vietnam’s current account still has a small deficit or surplus.

The Peterson Institute for International Economic Research (referred to as the Peterson Institute) has a more objective opinion: Countries have a legitimate need for a moderate amount of foreign exchange reserves to withstand shocks. surprise. Of the 2 countries labeled as currency manipulators and 10 countries put on the watch list, all countries exceeded the foreign exchange reserve criteria by a wide margin (except Vietnam); The use of the criterion of having a bilateral trade balance surplus with the United States as the primary criterion for defining an economy as a currency manipulator is unfounded in economics, especially in the context of trends in the economy.

Due to strong globalization, economies are deeply involved and diversified in global value chains (for example, according to the Peterson Institute, Singapore imports a lot from the United States, causing the US to have a trade surplus with Singapore, but the fact that these imported goods are exported to China and other Asian countries, as input materials for exports to the United States, Singapore makes a significant contribution to the US trade deficit. States with other countries). In addition, the Peterson Institute also thinks it makes more sense to consider currency manipulation only for high-income or upper middle-income countries; Meanwhile, Vietnam is a low-middle-income country, so it is not suitable to be labeled a currency manipulator as announced by the United States.

Third, the bilateral trade surplus with the United States and the current account surplus are the result of a series of factors related to the peculiarities of the Vietnamese economy.

Vietnam’s trade surplus to the US is only due to the specific economic structure correlation between the two countries, and Vietnam has successfully exploited the gap in consumer demand of the US people to boost exports. increased responsiveness to the US consumer market.

Data from the US Department of Finance shows that Vietnam’s trade surplus with the US has increased sharply in the past 4 years: from 38.3 billion USD in 2017, increasing to 39.4 billion

USD in 2018; 55.7 billion USD in 2019 and 63.4 billion USD in 2020. According to statistics in the United Nations Statistical Database of Trade Data (UNCOMTRADE), the total value of goods exports US goods in 2017 reached US$1,784 billion to the world market (of which Vietnam is the 31st largest importer of US goods), accounting for 0.5% of the total value of US goods exports. Ky.

According to this data source, in 2017, the United States imported goods worth up to 2,407 billion

USD from all trading partners (in which goods from Vietnam ranked 12th), accounting for 2. % of total US imports.

Data from the General Department of Vietnam Customs shows that, in the past 25 years, the two-way trade turnover between Vietnam and the United States has increased by 168 times, from 450 million USD in 1995 (Vietnam’s exports to the United States reached 168 million USD). 169.7 million USD; import turnover reached 130.4 million USD), increasing to nearly 76 billion USD

in 2019, despite the negative impact of the Covid-19 epidemic, bilateral trade turnover between Vietnam and China The United States still reached 90.8 billion USD, up more than 19.5% compared to 2019. In which, Vietnam’s exports reached 77.1 billion USD, imports from the United States reached 13.7 billion USD. Currently, the United States is Vietnam’s largest export market and Vietnam is the 16th largest economic partner of the US. In 2018, nearly 7.2 thousand Vietnamese enterprises exported goods to this world’s largest market, up 7.6% compared to 2017. Meanwhile, in the opposite direction, there were many businesses. Vietnamese enterprises import goods from

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the United States more than enterprises export to this market. Specifically, in 2018, nationwide, up to 13.2 thousand enterprises imported goods originating from the United States, an increase of 6.3% compared to a year earlier.

Thus, the devaluation of the VND does not support exports much (thereby supporting the surplus trade balance) due to the peculiarities of Vietnam’s economic structure. That is, a lot of exports means a lot of imports. This is because Vietnam’s import and export activities are dominated by the foreign business sector (FDI). This block accounts for 70% of Vietnam’s export turnover and 59% of import turnover in the period 2017-2019.

In summary, through the cases related to currency manipulation that the US accuses of countries (including Vietnam), it can be seen that the currency manipulation evaluation criteria applied by the US are not reasonable. solid foundation, has not yet received the consensus of trading partners, the recognition from international organizations and the expert community as well as the prestigious Research Institutes in the world.