China-Vietnam Diplomacy, US-Vietnam Strengthening Ties, How Vietnam Is Emerging As The ‘Key’ In Today’s Geopolitical, International Trade Arena With Growing Startup Ecosystem And Multifaceted Opportunities

China’s President Xi Jinping is set to embark on a two-day visit to Vietnam aimed at fostering a “community with a shared future.” 

This diplomatic endeavour comes three months after U.S. President Joe Biden visited Hanoi, highlighting the ongoing competition between major powers for influence in Southeast Asia.

Xi’s visit, the first in six years, has been meticulously planned and was briefly considered to coincide with Biden’s trip. The objective is to strengthen ties between the two Communist-led nations, characterized by close economic relations but marred by disputes over the South China Sea boundaries and a history of long standing conflicts.

Delayed due to protracted discussions over the framing of enhanced bilateral relations, Beijing now seeks to characterize the partnership as a “shared destiny,” a term initially resisted by Hanoi but likely accepted eventually. 

In an op-ed published in the Vietnamese Communist Party’s newspaper ahead of the visit, Xi emphasized the strategic significance of a “community with a shared future” between China and Vietnam.

Beyond symbolic elevation above the U.S.-Vietnam relationship, the visit involves the signing of “dozens of cooperation documents,” according to China’s ambassador to Vietnam, Xiong Bo. 

Much anticipated agreements include Chinese investments to upgrade rail links between the two nations, potentially involving grants; however, the specifics of aid volume and loan terms remain unclear.

A Win-Win

Both countries want to enhance transport connections, with Vietnam seeking increased exports to China, particularly in the agricultural sector. At the same time, Beijing aims to integrate northern Vietnam into its southern supply chain networks. 

Strengthened rail connections would also facilitate the import of Chinese components for assembly in Vietnam, contributing to the expansion of China’s Belt and Road Initiative (BRI).

Xi advocates accelerating infrastructure-building cooperation, extending to Vietnam’s inclusion in China’s Digital Silk Roads; this entails potential investments in undersea optical fiber cables, the 5G network, and other telecommunications infrastructure.

While the Hanoi metro is the only existing BRI-funded project in Vietnam, the country is cautious about openly labelling it as such, as a careful approach to sensitivities regarding close ties with Beijing. 

However, Potential agreements include easier trade, along with strengthened cooperation in renewable energy, rare earths, and tourism.

Xi’s focus is on the need to broaden cooperation in connectivity, state-owned enterprise reform, green energy, and critical minerals.

U.S. Boosts Ties with Vietnam Amidst Geostrategic Challenges

In a bid to strengthen diplomatic and economic relations, U.S. President Joe Biden also set to elevate ties with Vietnam during his recent visit, marking a significant shift towards a “comprehensive strategic partnership.” 

As global dynamics evolve, this upgraded relationship not only opens avenues for collaboration in critical industries but also spotlights the delicate balance Washington must maintain, considering China’s increasing influence in the region. 

Complex Geopolitics

The upgraded partnership between the U.S. and Vietnam holds promises for growth in crucial sectors, from semiconductors to defence, but more importantly, to counter China.

As the specter of China looms large, as evidenced by Biden’s remarks acknowledging concerns about Beijing’s changing trade rules and despite emphasizing a non-confrontational stance, the U.S. seeks to safeguard its interests and navigate a complex stance where economic ties intertwine with political considerations.

Economic Collaborations and Strategic Deals

The bilateral deals struck during Biden’s visit signal a deepening economic partnership. 

Vietnam Airlines’ purchase of 50 Boeing 737 Max jets and Amkor Technology’s $1.6 billion investment in a Vietnamese chip factory exemplified the tangible outcomes of this diplomatic overture. 

Beyond trade, the U.S. commitment to supporting Vietnam in developing rare earths, enhancing climate resilience, and addressing wartime dioxin contamination—a multifaceted approach to cooperation that extends beyond the realm of commerce.

U.S. President Joe Biden’s visit to Vietnam also yielded a landmark agreement, solidifying a “comprehensive strategic partnership” between the two nations. 

Geopolitical Shifts

Amidst China’s expanding influence, the U.S. has undertaken an extensive effort to build alliances across the Indo-Pacific, exemplified by initiatives like the Quad security dialogue and the AUKUS pact. 

Thus, Biden’s visit to Vietnam reflects a strategic move to establish clear ground rules for international relations without seeking containment. The focus is on fostering transparent partnerships that navigate shared challenges while maintaining regional stability.

Semiconductor Cooperation and Supply Chain Resilience

The agreement includes a significant commitment to semiconductor development, with the U.S. pledging support for Vietnam’s capabilities and expansion in this critical industry. 

The collaboration aims to address global supply chain vulnerabilities and reduce reliance on China for strategic resources; thus, by enhancing Vietnam’s semiconductor capabilities, both nations seek to bolster economic resilience and contribute to the stability of global supply chains.

Rare Earth Minerals and Strategic Diversification

Vietnam’s abundance of rare earth minerals places it at the forefront of global efforts to secure critical resources for high-tech manufacturing. 

The partnership acknowledges Vietnam’s key role in diversifying supply chains, particularly in industries reliant on rare earths, such as smartphones and electric car batteries. 

Complexities of Regional Dynamics, Vietnam

The delicate geopolitical balance in Southeast Asia demands nuanced diplomacy, particularly for Vietnam, caught between the U.S. and China. 

Hence, amidst the geopolitical complexities, Vietnam must carefully manage its relations with both the U.S. and China. 

Striking a balance between the two major communist nations (Vietnam and China) may prove challenging, particularly given their conflicting territorial claims in the South China Sea. 

The strategic importance of Vietnam as a potential alternative to China in global supply chains further complicates the regional dynamics, with the U.S. viewing Vietnam not only as a trade partner but also as a crucial player in its broader geopolitical strategy.

Why Is Vietnam Emerging To Be So Important?

Vietnam, with its robust taxation policies, competitive labour costs, and strategic multilateral trade agreements, is emerging as a powerhouse in Asia, presenting multifaceted opportunities for businesses.

Manufacturing Hub, Rising Up the Value Chain

With a solid foundation in manufacturing that contributes 25.1% to its GDP, Vietnam is strategically positioning itself as a manufacturing hub in Asia. 

The government’s vision to increase the manufacturing share to 30% by 2030 opens doors for foreign investments. Notable investments from global players like Apple, Foxconn, and Samsung indicate a shift towards high-value industries, creating opportunities for international manufacturers and technology providers.

Consumer Boom, A Growing Market 

Vietnam’s growing middle class, set to double by 2026, is driving a consumer spending boom; with a population of 97 million and increasing disposable incomes, F&B and education sectors are witnessing significant growth.

Businesses, leveraging their reputation for quality and trust, can tap into this consumer-driven market, especially with the Vietnamese government’s target to boost online shopping to US$35 billion by 2025.

Infrastructure Development

Vietnam’s ambitious infrastructure plans, requiring up to US$605 billion by 2040, create opportunities for international companies to contribute expertise and financing. 

Renewable Energy Transition

In line with global environmental goals, Vietnam is transitioning towards renewable energy, aiming to generate 50% of its energy from solar and wind power by 2045. 

Smart Cities Initiatives

Vietnam’s interest in developing smart townships and cities opens avenues for companies specializing in technology and sustainability. 

Further, firms can collaborate with public and private stakeholders in Vietnam, focusing on creating cashless economies, developing ICT infrastructure, ensuring public safety, and enhancing smart mobility.

Water Management

As Vietnam reviews water quality regulations and standards for wastewater treatment, many companies specializing in water treatment technologies are looking to seize opportunities in both urban and industrial applications. 

The demand for sustainable practices, particularly in industries like textiles and garments, aligns with several companies’ expertise in water recycling and efficient water use.

Technology, Innovation and Growing Startup Ecosystem

Vietnam’s growing startup ecosystem, home to four unicorns and numerous startups, presents opportunities for collaboration and investment. 

Venture Capitalists and companies alike are eager to tap into Vietnam’s pool of cost-competitive engineering and IT talent, establishing R&D centers or tech development hubs. 

The Last Bit, Vietnam’s dynamic economy, coupled with the government’s strategic initiatives, offers a fertile ground for businesses seeking expansion and collaboration. 

Vietnam presents many opportunities in a rapidly growing market from manufacturing to technology, renewable energy, and consumer-driven sectors. 

As President Xi Jinping concludes his visit to Vietnam, the echoes of a “shared future” resonate in diplomatic corridors- agreements signed and discussions held pave the way for enhanced cooperation, not only in economic realms but also in complex geopolitical waters. 

Similarly, President Biden’s visit to Vietnam marks a crucial milestone in strengthening regional partnerships and countering the geopolitical challenges posed by China’s ascendancy. 

As the dynamics in the Asia-Pacific region continue to evolve in a world marked by shifting alliances and power dynamics, Vietnam emerges as the key that fits the locks of many countries!