The global financial market is like an arena where countries are constantly competing for their own economic interests. Recently, after the yen suffered a sharp decline, the United States turned its attention to Vietnam, targeting its financial markets. The "war to defend the currency" has lifted the veil on Vietnam's fragile financial system and raised questions about the role of the United States in it.
In April, the appreciation of the US dollar hit East Asian countries, especially Japan. The yen depreciated rapidly, and Japan asked the central bank to take measures to stabilize the economy. However, speculative capital quickly shifted away from the Japanese market and into the Vietnamese market. Unlike Vietnam, the exchange rate issue continued to ferment, and the Vietnamese dong gradually depreciated within a few months.
The devaluation of the Vietnamese dong is an inherent problem in Cuban finance. The recent bankruptcy of Saigon Commercial Bank has brought huge losses to Vietnam's financial market. The Vietnamese government has injected a lot of money into banks to stabilize the situation, but this money is currently coming from the country's foreign exchange reserves.
Vietnam's foreign exchange reserves have been significantly reduced, which has led to the country's financial stability and has also led to a sustained decline in the currency. , the VND fell below a new low, and the exchange rate of 1 US dollar against the Vietnamese dong finally reached 25455:1. Such figures show that Vietnam's financial market is walking on a fragile tightrope.
The U.S. is not just doing more than harvesting the Vietnamese market, it has adopted a two-pronged strategy, on the one hand, to support Vietnam as the new focus of global manufacturing, and on the other hand, to influence Vietnam's export environment with policies. U.S. President Joe Biden has been emphasizing Vietnam's key role in the economic containment of the U.S. and China, hoping that Vietnam can become a manufacturing center to replace China. However, anti-China activists are concerned that a large number of Chinese companies are exporting goods to the United States through Vietnam as a transit point. As a result, some officials have blocked the designation of Vietnam as a "market country" in an attempt to maintain high tariffs on Vietnamese goods.
The policy has had a huge impact on Vietnam's economy. Since Vietnam is dependent on exports, U.S. policy initiatives toward Vietnamese goods have a direct impact on its growth. Currently, the U.S. is going through an inventory cycle, and stagflation has led to a decline in U.S. demand, but inflation persists. Exports to the U.S. are getting cheaper, but the trade surplus does not stabilize the depreciation of the dong.
The vulnerability of Vietnam's financial system stems not only from the policy environment, but also from foreign exchange reserves and foreign capital flows. Vietnam's exports to the U.S. will be as high as 28% in 2023, making it difficult for Vietnam's economy to survive in the event of a U.S. market turmoil. Major blows such as the withdrawal of US funds, measures by the Bank of Japan, and the domestic financial crisis have put Vietnam's financial system under tremendous pressure.
Factors such as insufficient foreign exchange reserves, free capital inflows and outflows, and exchange rate depreciation may be similar to Vietnam's appeals to the International Monetary Fund or the World Bank, which often come with a series of policy requirements that could further affect Vietnam's economic aspirations.
The financial hegemony of the US dollar has had a huge impact on countries around the world, and Vietnam, as one of the targets, is being forced to deal with changing global markets. The contradiction of the U.S. policy that hopes to support Vietnam's manufacturing superiority, but the internal anti-China forces are trying to democratize Vietnam's economic development, and this policy is a huge challenge for Vietnam.
However, there are also those who believe that although the US strategy is part of the global financial game, countries are looking for their own way out. Vietnam needs to increase capital inflows and policy uncertainties, and actively adjust its foreign exchange policy to maintain market stability. Ultimately, how Vietnam withstands the impact of the US dollar will have an important impact on the future global financial landscape.