Hanoi’s New Fears And Gains – Analysis

Vietnam's new leader To Lam is making China the destination for his first overseas visit, when he visited the country and met with Xi, signaling the option of China being the vital power that still remains on Vietnam's policy calculations, especially in supply chain and economic dimension. 

The fact that Lam chose China as his first overseas visit since his appointment reflects the fact that Vietnam attaches great importance to its relations with China, even with Washington's greater courting of Hanoi in recent months in a tit for tat move after Xi and Putin both visited the country. 

Biden's visit to Hanoi last year also marked the escalation of the overtures and the race to ensure Vietnam remains a reliable future supporter of Washington's quest to defend the rules-based order. 

Vietnam needs greater expansion and access to the Chinese market, especially to its agricultural products and high-quality investments, while China is eyeing Vietnam for its geopolitical returns and in ensuring a trouble free neighbour in its southern flank. Vietnam's new economic potential and its vast critical minerals including rare earths and the risks of Vietnam falling into Washington and the West's orbit.

The leaders are also set to accelerate plans on the construction of high-speed railway lines connecting China to Hanoi and key port cities.

Vietnam hopes to complete two high-speed rail projects by 2030 as it intends to modernise its ageing transport network and bolster trade with its northern neighbour.

This complements and forms part of the Pan Asia railway network, in giving both economic and trade returns and ensuring a dual advantage of fallback options should a conflict occur, both in maritime and land routes. 

During times of crises, the movement and supply chain of military support including troops, assets and food remain critical and these links and rails provide added options and support systems.

China is Vietnam's largest trading partner, with two-way trade accounting for US$173.3 billion last year.

However, Vietnam's exports to China is at less than half of the value of imports, indicating its heavy reliance on Chinese goods.

Mr Lam's visit will be closely watched by the domestic public, which holds deep mistrust of China due to centuries of wars.

The railways and the new Chinese presence in this domain will further put Hanoi's advantage at risk.

Russia's moves to diversify its source of support away from China centric approach with its overtures to North Korea and Vietnam, and consolidating its support with India and other regional powers, signal a new realization for Vietnam to also be wary of being fixated in China dominated economic importance alone.

While Vietnam is having the same hedging and balancing approach in getting the best returns from both Washington and Beijing, the odds of a full blown conflict over South China Sea or Taiwan Strait will complicate Vietnam's position and its aftermath.

Rare Earths Advantage 

Vietnam has the second-largest rare-earth deposits, according to the U.S. Geological Survey. But they have remained largely untapped, with investment discouraged by low prices that are effectively set by China because of its near-monopoly on the global market.

The plans to restart Vietnam's biggest rare-earths mine with a Western-backed project, are part of a broader push to dent China's dominance in a sector.

Vietnam is home to the second-largest rare-earth deposits, according to the U.S. Geological Survey. However, this opening has been derailed by various factors. The deposits remain largely untapped, and investment has been discouraged by low prices that are effectively set by China because of its near-monopoly on the global market.

An effective exploitation of Dong Pao which has sat dormant for years will enable Vietnam to be in the top tier of rare-earths producers. However, the next process which involves refining and processing is a complex one, and China still controls many processing technologies. 

If the extraction target is right, it would put Dong Pao's output slightly below that of California's Mountain Pass, one of the world's largest mines. 

During Biden's visit, Washington agreed to help Vietnam better map its rare-earths resources and attract quality investment, opening the way for new US investors to help develop the critical industry in the country. 

Pushing Factors for the US

Hanoi will be critical in supporting Washington's efforts to deter Beijing's South China Sea militarisation efforts.

Future potential bases in Vietnam will be strategic and critical in supporting existing bases in the Philippines and in linking up with support bases from Singapore .

This will be important in mitigating any benefits from China's usage of the Ream port in Cambodia.

Vietnam can also be used as a vital vanguard against Beijing in stopping deeper Beijing's dominance over South East Asia and especially the Mekong region. 

It will help the US in securing greater food security, stable supply chain, and as a great and stable trade and investment fallback amidst the new exodus of top firms from China.

Vietnam serves as the next economic stable platform for US firms and companies as a fallback against China's economic decline.

Enhancing Public Narrative and Soft Power

Using the last legacy and experience of war, Vietnam is in the best position to use this as a leverage and as an example in elevating Vietnam's role as a responsible, effective and important power in the regional and global scale in bringing about peace and cooperation.

Identifying the importance of rebuilding trust in an era with a trust deficit, Vietnam wanted to promote the role of common sense of responsibility, solidarity and cooperation.

In promoting the essence of people centred focus, Vietnam realises the importance of human capital and talent, and mobility of knowledge and talent in developing a country's development.

Hanoi also knows that the best asset it has is its own people, with a large advantage in demographic assets, young people, and rising future productivity and contributing towards a strong and secure nation by tapping on its demographic advantage.

The focus on a foreign policy of independence, self-reliance; multilateralisation and diversification; being a good friend and trustworthy partner of all countries, and a proactive and responsible member of the international community, all these are to send a message to ASEAN, China and the West as a whole that as much as Vietnam wants to leverage on each of their strength, Vietnam has enough self reliance capacity on its own without overwhelming need to risk its own future trap by being overly reliant on one power.

Vietnam still has greater chips and cards in using these assets, resources, future growth and strategic position to wield influence on both China and the West.

By maintaining the message that Vietnam has the ability to be neutral, independent and self reliant in its policy orientation, it has both the power to withstand Chinese pressure, as well as Washington's overtures.

Hanoi will get better leverage and bargaining chips in its regional influence and policy options with regards to ASEAN and other individual regional players in trade, economic and investment domains as a means of talent attraction, manufacturing, and investments in critical sectors and in areas of food security.