Vietnam’s strategy to balance conflict, cooperation and competition with China

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International Relations

China and Vietnam have had a long history of conflict, cooperation and competition in the region, especially since the end of the Vietnam War. Towards the end of the Vietnam war, relations between China and Vietnam were diminishing. Despite the economic and military assistance provided to Vietnam by China during the Vietnam War, Vietnam expelled ethnic Chinese citizens from its territory and engaged in the Sino-Vietnam war in 1979 to limit the Chinese influence in Cambodia after the Vietnam war. As the years have progressed, these aspects of conflict, cooperation and competition between the two nations have persisted but evolved.

In the contemporary era, Vietnam is the largest trading partner with China amongst the ASEAN member states. Apart from having strong economic ties, Vietnam has also been open to China’s Belt and Road initiative (BRI) but with a cautious outlook on it. Vietnam acknowledges the opportunities that China’s BRI brings development to the region, but on the other hand it also recognizes the risks that come along with it. Hanoi has always considered the BRI initiative as “too good to be true”. Although bad history and security risks do not allow Vietnam to fully embrace the initiative, Vietnam stands to gain significantly due to the BRI initiative. Vietnam’s growing demand for infrastructure investments has created a need for BRI funding. According to a report from Maybank Kim Eng’s research arm, Vietnam drew US$1.6 billion from investments related to BRI in 2019. The two countries promised to strengthen their bilateral relations through various cooperation mechanisms during the 13th meeting of the China-Vietnam Steering Committee for Bilateral Cooperation in 2021. China has also been one of the main aid providers to Vietnam during the Covid-19 pandemic.

Sino-Vietnamese trade relations are strong and they have established successful bilateral relations in various fields of cooperation. However, Vietnam shares a cautious relation with China due to security risks and the risk of economic overdependence. In current day politics, Vietnam faces a huge challenge in the South China Sea. Vietnam is the most vocal country in the region that opposes China’s constant attempts to establish the Nine-Dash line in the South China Sea. Fishing and oil standoffs since 2013 have only contributed to this rising tensions between the two countries. This has resulted in rising anti-Chinese sentiment in Vietnam. Vietnam also suffers from a trade deficit when engaging in trade with China. The ratio of imported input products in Vietnam's intermediate costs is much larger than that of China (0.29 compared to 0.08), hitting an all-time high of  $35.2 billion in 2020 and up to $23.52 billion in the first 5 months of 2021. Considering Vietnam’s national debt, growing Chinese investment can be detrimental to the country’s economy. China has also used BRI projects as leverage to challenge Vietnamese dominance in Cambodia and Laos. This has motivated Vietnam to strengthen its alliances with alternative powers to combat the growing Chinese influence in the region.  

In recent times, China has been wary of Vietnam’s increasing collaboration with other regional and external powers. Vietnam has been a recipient of aid from Japan to strengthen its maritime capabilities, technology and economic investment through its Free and Open Indo Pacific Strategy. Japan has also been supportive of Vietnam’s fight against China in the South China Sea dispute. The recently signed Japan-Vietnam defence transfer deal (2021) imports Japanese defence equipment and technology to Vietnam which helps counter the Chinese dominance in the region more efficiently. Vietnam has also been increasingly cooperating with the United States in the field of security. It is estimated that the United States has over $162 million in active Foreign Military Sales with Vietnam. According to the statistics published by the U.S Department of State, Vietnam received approximately $60 million in bilateral State Department-funded security assistance under the Foreign Military Financing (FMF) program and more than $20 million under the Department’s Southeast Asia Maritime Security Initiative (SAMSI) regional FMF account.  Additionally Vietnam also received $81.5 million of FMF in 2018 to support the Indo-Pacific Strategy.

The growing US and Japanese spending on Vietnam to integrate it further into the Indo-Pacific strategy indicates the strategic importance of Vietnam in the region. Vietnam is also taking more initiative to take part in talks conducted by the QUAD. In March 2020, Vietnam was invited by the Quad to join the talks on Covid-19 and its impact on the economy. Vietnam’s participation in QUAD meetings shows its willingness to cooperate with other actors against Chinese interests.

In the contemporary era, Vietnam has chosen to expand its network to incorporate regional powers. Regional powers such as India and Australia seek to have bolstering relations with Vietnam. India and Vietnam consistently exchange and meet at all levels, especially high level visits to strengthen cooperation and encourage development in all fields. Vietnam-India relations revolve strongly around its key pillars of politics, defense-security, economy-trade, culture, and human resource training. In 2016, India and Vietnam formally advanced their partnership to ‘comprehensive strategic partnership’. Defence and trade are important components of the comprehensive strategic partnership between India and Vietnam. On the multilateral front, Vietnam strongly appreciates India in the international political arena and supports India’s status as a permanent member of the United Nations Security Council. Considering the rivalry between China and India in the Indo-Pacific region, Vietnam’s support for India’s permanent status in the UNSC goes directly against Chinese interests.

Vietnam and Australia also share longstanding defence and security ties that go back nearly two decades. In 2009, both Vietnam and Australia enhanced their cooperation by signing the the Comprehensive Partnership Agreement. This agreement laid the base for the development of defence and security cooperation. Both the nations have strong interest in the Asia-Pacific region and have declared that the 'security and prosperity of both countries is linked to a secure future for the Asia-Pacific region' and pledged to 'work together in regional forums to develop credible security architecture'. Vietnam and Australia consistently exchange defence personnel, conduct joint training, host ship visits, and conduct regular dialogues on regional security issues between foreign affairs and defence officials.

With strong economic cooperation with China and strengthening security cooperation with regional and external powers such as the US and Japan, Vietnam currently practises hedging strategy. According to Alexander Korolev, the space to hedge in Southeast Asia is shrinking as Sino–American competition increases in the Asia-Pacific region. Although hedging strategy has worked for Vietnam so far, the growing Chinese influence in the region is going to challenge Vietnam’s policy towards China. This means that the systemic pressure to choose between China and the United States has gone from low to high. Vietnam currently pursuing a hedging strategy, will soon face the dilemma of making a choice between China and the United States.

Furthermore, Vietnam’s proactive role in pursuing stronger relations with regional powers such as India and Australia is a result of increased threat of the rising Chinese sphere of influence looming over Vietnam. Vietnam is threatened by Chinese dominance in the South China sea and the strategies that China uses to dominate the region. There have been various instances where China has adopted strategies such as the Cabbage strategy to exert its influence in the South China Sea. The expansion of the cabbage strategy  in the South China Sea acts as a catalyst for Vietnam to diversify its trade partners and adopt measures to protects itself from Chinese dominance. However, China being an important part of the Vietnam market, makes it difficult for Vietnam to avoid hedging.

Vietnam needs to re align its strategy in order to avoid being caught between the rising competition between the United States and China in the region. It needs to focus on diversifying its trade to avoid over dependence on China. The signing of Regional Comprehensive Economic Partnership, which came into effect in January 2022 has provided Vietnam with an opportunity to lessen its economic dependence on China. Limiting its interactions with the QUAD is also crucial if Hanoi wants to maintain a nonaligned position in the region. Moreover, Vietnam needs to play a proactive role in establishing a global voice for ASEAN if it wants to survive the power politics in the region.

Another way Vietnam can exert its regional power in the Indo-Pacific  region is by being an integral part of the ASEAN Outlook on the Indo-Pacific. The ASEAN Outlook on Indo Pacific visualizes ASEAN Centrality as the fundamental principle for promoting cooperation in the Indo-Pacific region, with ASEAN-led mechanisms, such as the East Asia Summit (EAS), as platforms for dialogue and implementation of the Indo–Pacific cooperation, while preserving their formats. With its sole purpose as to establish a ASEAN Centrality in the region, this regional framework allows Vietnam to continue hedging between China and the United States.