Le Hong Hiep

China’s controversial nine-dash line claim to the South China Sea is creating problems for its businesses operating in Vietnam.

Chinese Foreign Minister Wang Yi paid an official visit to Vietnam on 10-12 September as part of Beijing’s efforts to reassert its influence on Vietnam and pull Hanoi back from its perceived ‘tilt’ towards Washington. Hosting Wang Yi provided Vietnam with an opportunity to address existing issues in bilateral relations and certain domestic concerns, especially to secure China’s support for the Covid-19 response. However, Vietnam-China relations are fundamentally constrained by strategic distrust over the South China Sea dispute. The intensifying China-US strategic competition is another challenge for Hanoi.

Lloyd Austin’s visit to three Southeast Asian countries in July 2021 was aimed at reaffirming America’s commitment to regional alliances and partnerships amid concerns of US neglect of the region in the first six months of the Biden administration. The messages delivered during his trip, particularly in his Fullerton Lecture in Singapore, outlined the broad contours of the Biden administration’s Southeast Asia policy that goes beyond the dynamics of US-China strategic rivalry and seeks to provide a more holistic and positive agenda of US engagement with the region.

The Vietnam People’s Army (VPA) appears to be gaining leverage in Vietnam’s political system. This increasing influence reflects the security concerns of the Communist Party of Vietnam (CPV) over growing tensions in the South China Sea, and its political position has also benefited from the growing importance of the defence industry and the commercial success of military-run businesses. How would such a development affect Vietnam's political, economic and foreign policy outlook?

Many Vietnamese feel that their country has benefited much from US President Donald Trump’s policies, such as his tough stance on China and the US-China trade war. However, that does not mean that US-Vietnam relations will lose its momentum under a Biden presidency as the two countries strategic goals are aligned, says ISEAS academic Le Hong Hiep.

Vietnam’s recent decision to cancel deals for oil and gas activities in waters around Vanguard Bank has caused significant financial and reputational damage. ISEAS academic Le Hong Hiep says while there are several reasons for Vietnam cancelling the deals, Chinese pressure is high on the list and Hanoi needs to rethink its strategy to avoid similar incidents in the future.

Vietnam stands to benefit from MNCs’ efforts to diversify their production base beyond China. How much it will actually benefit, however, depends on how fast it can roll out measures to further improve its infrastructure and business environment.

This week, the USS Theodore Roosevelt will become the second US aircraft carrier to visit Vietnam since the end of the Vietnam War. While it is in Vietnam's interest to maintain a stable relationship with China due to strong economic ties, on matters of strategic interest, Vietnam finds no other power more compatible to work with than the US, to create a counterbalance against China.