What the invasion of counterfeits tells us about Vietnam's economy
In Tan Thanh market, Northern Vietnam, shoppers are in heaven. Every day, they travel from afar to find bargains on designer clothing, electronic goods, handbags and toys. There they find the latest of fashion and technology, like brand new iPhones 5s (not yet released by Apple) or flashy ‘Adibas’ (no typo) track suits. Of course, like everywhere in the world, most of these are counterfeits of Western icons. And like everywhere, they’re made in China.
But for Vietnam these items carry added significance. Their sheer volume, in a market allegedly protected against cross-border smuggling, says enough about Hanoi’s failure to control its borders. But it says even more about the asymmetry in economic relations between Vietnam and China. Last year Vietnam’s trade deficit amounted to $12.4bn, or 12 per cent of GDP; most of it was with China. And mostly the former exports raw materials and food, whilst the latter provides finished goods and machinery.
True, this is partly financed by foreign investment, remittances and international aid. But the balance has to be bridged by dwindling foreign exchange reserves. And China’s overwhelming competition further bullies Vietnam’s exporters, already weakened by an overvalued currency. This worries economists, who alongside politicians and the military see the rise of increasingly assertive China with little comfort (Beijing has recently rocked a few boats on the North China sea).
But Tan Thanh is no place for geopolitical debate. Vietnamese consumers, their arms full of fake luxury goods, seem to see the good side of trade deficit. And much to the dismay of economists, the consumer is always right - even in communist Vietnam.