Why did Vietnam, the "emerging economy of Asia", fall from the highlight to the bottom in just two years? The country, once seen as the "factory of the world," is now experiencing an unprecedented economic crisis.
The drama begins: The world is flat
Just a few years ago, signs of Vietnam's economic boom were everywhere. In 2021, Vietnam's stock market soared by 80%, and the property market soared by more than 70% in some hot cities. GDP is also growing at a rapid rate of 6% per year, far outpacing other emerging economies in Asia.
For a time, foreign capital flocked to this land like bees, and it was this hot land of cheap labor. In 2022, global manufacturing giants such as Samsung and Intel invested a total of US$3 billion in Vietnam. It was once believed that Vietnam was the next "factory of the world".
The climax doesn't last long, and the bubble will eventually burst. Just last year, a rare case of tens of billions of dollars in bank loan fraud came to light, turning the tide dramatically.
The fuse of this drama turned out to be the "empty glove white wolf" scam starring Vietnam's richest man, Zhang Meilan. In the name of women's capital, she received billions of dollars in loans from Saigon Commercial Bank, Vietnam's fifth-largest bank, but diverted large sums of money to land hoarding.
Once the bubble burst, the vast amount of land that Zhang Meilan had hoarded turned into worthless stones. In order to fill the hole and save the Saigon Commercial Bank, which was at the center of the storm, the Vietnamese government had to come up with $23.7 billion in precious foreign exchange reserves, which cost nearly a quarter of the foreign exchange reserves.
This is the opening scene of the big play, and the next development is even more ridiculous.
The exodus of foreign capital and the economy hit the streets
The United States has raised interest rates repeatedly to stifle global liquidity, leading to a tsunami-like exodus of foreign capital. Vietnam was swept away by an unprecedented economic crisis.
In 2023, foreign investment in Vietnam will decrease by more than 3 percent, and hundreds of billions of dollars of foreign capital will flow out of Vietnam. As a direct result, Vietnam's foreign exchange reserves have been nearly emptied, and Vietnam has had to auction off gold to save its crumbling foreign exchange reserves since last month.
At the same time, Vietnam is facing a huge external debt crisis of up to $200 billion. Under the double blow of foreign capital flight and sharp decline in foreign exchange reserves, Vietnam's economy is now at the critical point of collapse.
Not only that, Vietnam's property market has been hit hard in 2023, with house prices plummeting by 37%, nearly 90% of new homes are unattended, and more than 1,200 properties are unfinished. The stock market also fell by more than 50% in 2022, directly eroding the wealth of ordinary Vietnamese.
All this reflects how easy it is for foreign capital to withdraw from Vietnam. What exactly does Vietnam lack?
Hollow villages, with no shells
What seemed to be a dazzling economic miracle back then was actually just a shell economy with nothing on the surface. Vietnam lacks real industrial strength, and even more so lacks the ability to innovate independently. Vietnam has a complete range of industries, but they are all naked outsourcing processing.
About 54% of machinery and equipment and parts, 52% of textile and leather raw materials, and 40% of mobile phones and parts rely on imports, mainly from China. This has also led to Vietnam's annual surplus with China of up to $40 billion.
Many factories in Vietnam are owned by foreign capital, who suck blood and profit from the land, but never want to put down roots. Once the situation is unfavorable, they can easily choose to flee.
Vietnam's openness to foreign investment is also an important reason for its economic vulnerability. As long as foreign capital is willing to invest, Vietnam gives all kinds of preferential treatment without principle, from land taxation to market access. As a result, foreign capital has been sucked out and Vietnam has been left destitute.
The so-called world factory turned out to be just a hollow village, an economic form with an empty shell and a lack of internal strength. It is this weakness that led to the departure of foreign capital, and Vietnam's economy collapsed in an instant.
This predatory development model of foreign capital has made Vietnam stage a ridiculous economic drama. It is not only an active death, but also ignorant of the depths.
Is the ending bizarre, or is it a historical necessity?
Some people say that Vietnam's economic collapse will not be a flash in the pan, and that everything will be fine when foreign capital returns to the market.
However, the truth is far from simple. Every time foreign capital goes in and out, Vietnam's economy is plundered. This wave of foreign capital flight will only accelerate Vietnam's bankruptcy process. With its foreign exchange running out and its exchange rate plummeting, Vietnam has no choice but to repay its huge foreign debt by selling off state-owned enterprises and land. Heavily indebted, Vietnam is on its way to becoming the next Argentina or Egypt.
Although the drama of Vietnam ended hastily, it was a thought-provoking tragedy. It reflects that excessive dependence on foreign capital and lack of endogenous motivation will inevitably make a country's economy fragile and at any time at risk of collapse.
Vietnam's failure once again proves a cruel truth: without an industrial system with core competitiveness, any economic take-off will be a tree without roots and a castle in the air. An economy built on outsourced processing and colonization by foreign capital will eventually be plundered.
This is not only Vietnam's current drama, but also a lesson that has been repeated again and again by developing countries. Who chose this play? Who buried the drama? Vietnam's economy, which was once praised on the altar, is destined to become an episode of regret and reflection in the long river of history.