Looking at the situation when the USA could put Vietnam on an advanced watch list

In the opinion of experts, businesses and investors are not worried about this situation, when taking into account the history of such list and practices in Vietnam.

The assumed situation

On May 9 and 10, a number of international news agencies quoted information from Bloomberg referring to the situation in which the United States expands the list of countries that the US considers to be “currency manipulation”, which Vietnam might be named.

Specifically, the situation assumes that the US can expand this list from 12 countries (according to the scope of published numbers in October 2018) to 20 countries in the upcoming time.

It should be noted that, in addition to the situation of expanding the number of countries, the evaluation criteria may also be adjusted towards the extent of the review.

In that situation, Vietnam is under this review, along with some other countries which may also be in the same situation, such as Russia, Ireland, Thailand, Indonesia, Malaysia – countries having large trade surpluses with the US.

The United States defines three criteria for assessment and consideration, which are considered as “currency manipulation”, including: firstly, the nation’s current account surplus is greater than 3% of GDP; secondly, the bilateral trade surplus with the US is of at least $20 billion; thirdly, intervening in the foreign exchange market exceeds at least 2% of GDP.

As above, the following evaluation criteria of the US Department of Finance can be adjusted, as some international news agencies mention: reducing the current account surplus limit from 3% to 2%. This adjustment may lead to the supposedly expanded list above, which includes Vietnam.

Replying to BizLIVE, representatives of some of the functional clues think that, there is no official information about the new US list of “currency manipulation” countries, as well as the official extension of numbers from 12 to 20 countries to be published; The fact that some international news agencies mention is a situation.

When there is no official list that the US approves and announces, the above clues refuse to give their opinions and points of view, even though it is thought that this is the content getting attention, when Vietnam is under the evaluation as mentioned by news agencies in the above situation.

History of the watchlist and practices in Vietnam

“Looking at the changing history of the list that the US considers to be “currency manipulation”, if a country achieves one of the criteria set by the USA, it is included in the report. From the list, advanced surveillance can be taken later”, said the expert.

“But, according to the history of this list, since 1994 there has been no specific conclusion to any country about what is said to be “currency manipulation”, even the case of China – the country having an outstanding tense trade relationship with the US last year so far”, the expert added.

He thinks that this is an event that needs to be followed up, waiting for official and final information.

For businesses and investors, the expert points out that the problem is not too worrying, because the actual trading and economic relations of the countries, which are currently named in the list, are still good, these countries may not suffer adverse effects later.

On the other hand, for Vietnam, there are actually some considerations in managing monetary policy over the past time when looking at the above situation.

First of all, about foreign exchange, the intervention is not one-way, but both in Vietnam.

Net purchase of foreign exchange in recent years has been clearly recorded, but many times Vietnam carries out buying net foreign exchange in large number to stabilize the exchange rate (in other words, to avoid devaluation of the domestic currency), typically  at the end of 2018 some investment organizations have calculated that the selling scale amounted to about $5 billion.

Practices in 2018, in the context of the US-China trade tension, with the continuous increase in interest rates of the US Federal Reserve System (FED), many currencies depreciated strongly, but the Vietnamese dong was the leading currency that remained stable in the region.

And looking back, the amount of foreign currency of net buying enabled the increase of the foreign exchange reserves, which contributed from the conversion of resources which are accumulated and held in the previous economy, reflecting the belief in the stable value of the Vietnamese dong and operating policy and inflation policy is controlled at a low level … This is compared to the net purchase level which is much higher than the overall balance surplus.

However, according to the above expert, the net purchase of a large amount of foreign currency and Vietnam’s foreign exchange reserve set a new record, but in fact, the scope is still small compared to many other countries, as well as the standard which is necessary for the balance with import and export turnover.

“I think that, if the list is expanded and the criteria are adjusted, before the final conclusion, the US will consider and evaluate those characteristics of Vietnam in particular,” said the expert.

According to Minh Duc


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