ACCUMULATING PERIPHERALS


Vietnam: “The student is already ahead of the teacher” by foarp
July 18, 2009, 12:04 pm
Filed under: China, Uncategorized, Vietnam

[By FOARP]

I recently came across this interesting article by a Chinese author with the pen name 云淡水暖 (roughly “Pale Clouds and Warm Water”) on the economic and political reforms in Vietnam, a country whose development mirrors that of China, but where inflation has been breaking double figures for some time now. Before Vietnamese inflation became a problem some in China were minded to find lessons in Vietnam’s reforms which have created a slightly more liberal political system than that currently existing in China. Writing in the The Observer-Star, in an article called “Vietnam’s Reform is Worthy of Attention” Zhou Yanjin (周瑞金) went so far as to say:

“. . . we can see that the Vietnamese Communist Party’s political reforms are on the right track, produce results, have effect. The student is already ahead of the master. At a time when Vietnam is ever more courageously and determinedly turning towards broad, open minded, and total reform, China’s reform is entrapped in backward thinking and disorder. From this can’t we see that Vietnam’s reforms are deserving of our attention?”

However, since inflation took off, hitting a year-on-year consumer price high of 28% last August, Chinese observers have been inclined to deduce a different lesson – that Vietnam went too far. Here’s Guo Zhongxiao (呙中校) in an article in Southern Metropolis Daily entitled “Who took Vietnam from heaven to hell?”:

“Since the implementation of reform and opening in 1986, economic reforms have been effective. From the system of agricultural contracts and national planning reform, to the socialist market structure of the economy, it was not hard to see the deep imprint of China. However, Vietnam’s reforms have been quicker than China’s, and steps were taken ahead of China’s reforms, no matter whether the reforms were economic or political in nature.”

It would seem that even the moderate political reforms introduced by Vietnam (such as multiple candidate elections for communist party chief as opposed to single-candidate rubber-stamping) are now firmly off the drawing board in China.

[Update] Here’s a nice round-up in English of the argument as it stood before the on-set of high inflation.

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2 Comments so far
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Well, this is interesting, but high inflation in Vietnam disappeared in August 2008. It resulted from a combination of factors — excessively liberal credit expansion policies and lax supervision of (new) commercial banks, along with high commodity prices — that seem to me to be completely unrelated to any intra-Party democratic reforms undertaken by the Communist Party. I’m not sure what mechanism the Chinese authors conceive for limited intra-Party democracy leading to rapid expansion of credit, but that argument sounds extremely tenuous to me. Far more important might be the effect of decentralization in empowering Province-level governments to engage in wild spending and inefficient promotion schemes, but that would seem to be a problem common in China as well. Another important issue is the inefficient allocation of state capital to poorly functioning state-owned industries, but again, this seems like a problem common in China as well. The final factor in inflation is probably that Vietnam runs an annual trade deficit rather than a trade surplus, due in large part to influxes of remittances that can run to 5% of GDP and development aid that also can run to 5% of GDP, as well as to its inability to compete with Chinese manufacturing in many areas. The trade deficit significantly limits the country’s freedom of action in monetary policy (unlike China). But none of this seems to me to have much to do with political reforms, and Vietnamese inflation seems instead more like a convenient excuse to avoid intra-Party reforms.

Comment by mattsteinglass

Inflation was still running double figures last I checked (although that was in February), but it certainly peaked in August last year and has been declining since. I agree that this is mainly BS on the Chinese side, the arguments you see basically accuse the Vietnamese of being westernised (i.e., more central govt. officials are western educated), of making excessive concessions to the west, and of pandering to local concerns. Somehow I don’t think that’s how it actually looks on the ground, but it is how it’s been portrayed in China.

Comment by foarp




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