Like a motorbike that weaves its way through the crowded streets of Ho Chi Minh City, Vietnam has navigated into the fast lane and established itself as an indispensable bridge between China and the United States, emerging as a key player at the centre of the supply chain between the global juggernauts.
And with more US companies exiting China yet keen to maintain a presence in Asia, its strategic significance is set to grow.
The Southeast Asian economy is an unintended beneficiary of US moves to counterbalance China’s influence in the region and diversify its trade partnerships. However, the fact is that China’s influence remains substantial, given the level of Vietnam’s dependence on it.
As Tuan Quang Phan, an associate professor at the University of Hong Kong Business School, puts it, China has a “critical role to play with its southern partner”.
More recently, trade between Vietnam and China has taken on a distinctly Asian flavour that is helping to solidify economic ties. Chinese consumers have emerged as major buyers of durian – the smelly, spiky fruit also known as the “king of fruits” – that is becoming one of Vietnam’s most exciting exports.
Global sales of durian have risen during the past nine years, and most of them were consumed by hungry Chinese. According to data from WorldTrade, global imports of durian amounted to US$4.66 billion in 2022, of which 86 per cent went to China.
Durian – the smelly, spiky fruit also known as the “king of fruits” – is becoming one of Vietnam’s most exciting exports. Photo: He Huifeng
Thailand has traditionally exported most of the durian bound for China, but that is starting to change after Vietnam exported its first fresh durian to China in 2022 following years of negotiations. The latest figures show that, in the first half of this year, Vietnam globally exported US$876 million worth of durian, 95 per cent of which went to China.
Sales of durian are not feeling the impact of a slowing Chinese economy, given the growing appetite of the middle class for the pungent fruit. “There is still a strong case of demand hugely outpacing supply,” said Joseph Ngui, founder of Malaysian agricultural firm EcoCrop. “In this economic hardship, durian could still be seen as a form of affordable luxury.” Ngui’s company is currently exploring investment opportunities for durian cultivation in Vietnam.
China’s love for durian even managed to endure the Covid-19 pandemic as imports jumped from US$1.6 billion in 2019 to US$4.21 billion in 2021 – a period in which demand for other products across most mainstream sectors was muted.
While people’s taste for durian is starting to grow in other markets around the world, from a logistics standpoint, the short distance between China and Vietnam means there are cost savings to be had.
Some consumers prefer downstream products such as durian ice cream and cake, which can have less of a strong smell. However, there is still a stigma around the fruit, with many people still unsure if durian is banned in their country. It has been prohibited in many public places because of the odour.
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Customers in China sneak a durian feast in supermarket
Customers in China sneak a durian feast in supermarket
The love affair over durian between China and Vietnam is a good example of how China’s influence in the region cannot be understated, even as relations between the US and Vietnam evolve.
US President Joe Biden’s recent visit to Hanoi was symbolically potent and his declaration that the two nations are critical partners will boost their alliance. However, for Vietnam to build on and draw maximum benefit from this partnership, it must also build stronger economic ties with China.
After all, Chinese exports to Vietnam have jumped at an annual rate of 22.1 per cent, from US$718 million in 1995 to US$129 billion in 2021, according to data from the Observatory of Economic Complexity.
It is only relatively recently that China’s exports to Vietnam, as well as to the rest of the world, have started to decline as the country faces economic headwinds amid a shrinking population, sluggish productivity growth and decreasing global demand.
Moreover, Hanoi has to rely on Chinese imports to support its own sales of goods to the US, particularly in vital sectors such as mobile phone manufacturing. Vietnam might be the world’s third-largest mobile phone manufacturer as of 2022, but it still needs China to manufacture intricate components.
Once shipped over the border, Vietnam usually completes the final stages of the manufacturing process, capitalising on its more affordable labour market. This also supports the growing preference of US consumers for goods made in Vietnam against those made in China. US tech giant Apple’s decision to diversify its production base out of China and manufacture its MacBooks in Vietnam further illustrates this point.
Vietnam’s delicate balance between the economic powerhouses of the US and China is akin to the careful cultivation of the durian. While complex and layered, it can yield rich rewards when managed correctly. Vietnam’s prowess in the global trade landscape demonstrates the fruits of astute diplomacy and economic strategy.
Sonja Cheung is editorial director at the Asia Business Council. She holds a BA (Hons) in classics from University College London, and a master’s degree in Chinese Studies from SOAS University of London
