Just after Fed 
raised the target interest rate range by 75 basis points to 3%-3.25% for the third time in a row and sent out a super radical hawkish signal, Vietnam Central Bank urgently increased 100 basis points, and for the first time in two years to cope with the higher inflation and the increase in financial market risks.
A corner of Vietnamese cities
Although Vietnam's first two quarters of this year's GDP growth and export data are impressive, the global economic development is low, and the tightening of financial conditions will bring inflation and demand pressure to Vietnam. At present, high inflation in European and American countries has begun to affect the domestic production activities of Vietnam's agriculture and industry, and is driving inflation to soar, which is a major challenge for Vietnam's economy and financial markets, and it also needs to solve the risks of non-performing loans in the banking system.
In response to this, the governor of Vietnam's central bank said that while controlling inflation, promoting economic growth is a challenge for Vietnam. Vietnam's biggest challenge at present is the pressure on the economy and financial markets caused by rising inflation. Vietnam's consumer price in August rose 3.6% from the end of 2021. The central bank's target this year is to have an inflation rate below 4%.
A corner of Vietnamese cities
According to data from Refinitiv Eikon, As of September 23, Vietnamese dong fell for nine consecutive days. The exchange rate of Vietnamese dong to the US dollar hit a record low of 23,700 in at least 1993. In particular, Vietnam's foreign debt expansion is faster and has been listed by international institutions as one of Southeast Asia's countries that most need to consolidate their finances.
Vietnam currency September trend
Experts in Vietnam's securities industry said that at present, Vietnam has to step up its monetary policy shrinking, coupled with global risk aversion, which will pose multiple threats to the Vietnamese financial market. This downside risk will continue until 2023 and will affect all aspects of Vietnam's economy.
In fact, the BWC Chinese website financial team noticed that in recent years, Vietnam is mobilizing its national strength to start the world factory and industry 4.0 program, and has begun to spare no effort to absorb capital, debt, technology, manufacturing companies and even talents from the United States and Vietnam's economy seems to have suddenly become an economic black hole.
However, at present, the return of the US dollar and the continued increase in the expectations of rising US dollar interest rates, the dilemma of raw materials and commodity supply chains may have a long-term impact on the financial market after a sharp rise in Vietnam's recovery pace and inflation, and will have a negative impact on many Vietnamese companies.
especially . Under the interweaving of multiple economic pressures such as high inflation, high energy and fuel prices and high local manufacturing costs, the United States will start the process of harvesting the black hole of Vietnam's economic and financial debt market in order to transfer its own debt and inflation risks.
The explanation of zero hedging by financial websites is that the core crux of the reason why Vietnam's economy is fragile is that it falls into the black hole of the US dollar debt trap and wants to exchange interests with Wall Street Group. However, Vietnam's foreign reserves are burdened with external debt accounting for nearly 70% of GDP. They have been rated by international institutions as the country that needs to consolidate their finances the most. As of September 16, the total debt of banks has increased by 10.47% compared with the end of 2021, and credit growth will reach 14%.
Vietnam's foreign debt share
This shows that the high growth of Vietnam's economy in the past was accumulated by huge US dollar debt. This will intensify the volatility of the Vietnamese market and squeeze out international investment as the United States begins to harvest.
In response to this, research institute FocusEconomics said on September 24 that Vietnam basically experiences an economic crisis every 10 years. This will become clearer in the context of the Vietnamese central bank's response to the radical Fed rate hike that will be more clear in the context of the unexpected rate hike of 100 basis points on September 22, because Vietnam's economic miracle relies on accumulating risky loans and foreign debt to expand economic growth, but Vietnam does not have a broad foreign reserve moat.
Vietnamese currency
Data shows that as of July, Vietnam's foreign exchange reserves have dropped to US$10.1 billion (IMF released its report on August 22). This is in the context of Vietnam's increasing interest rate hikes beyond expectations in response to the Fed's aggressive interest rate hikes, the trend of Vietnam's currency continuing to decline will not change in the short term.
This shows that Vietnam's external debt repayment costs have begun to increase exponentially, and the default risk soars, and it is very likely that US capital will harvest wealth, which puts the Vietnamese stock, bond and foreign exchange market at risk of a crisis, which also causes a large number of wise investors to withdraw from the Vietnamese market in advance. For example, most of the profits of Vietnam's manufacturing industry are in the hands of European and American manufacturers.
According to the Vietnam Express report on September 24, due to strong selling pressure, international investment with a keen sense of smell is quietly withdrawing from Vietnam. Within the five months ending September 22, foreign investors have net sold out financial securities assets of up to 960 trillion Vietnamese dong in advance, retreating from the Vietnamese market and not returning, almost 4.9 times that of the same period in 2021.
analysis stated that this downward risk in Vietnam's financial market will still dominate the market and will affect all aspects of Vietnam's economy. At the same time, Vietnam also faces an increase in macro risks such as rising inflation, supply chain shortages, weather factors, and real estate debt development, and has a negative impact on many foreign companies that come to Vietnam to invest.
According to the data of World Bank , because Vietnam's land and labor resources are cheap, and I learned from China's experience in attracting foreign investment in manufacturing. Soon after, per capita GDP began to rise rapidly, and all this is a bit similar to the Chinese economy more than 30 years ago.
At present, Vietnam is trying to become a manufacturing power by learning from the successful experience of China's economy. For example, as the rapid development center of Southeast Asian production, Vietnam has achieved outstanding achievements in the textile, clothing and shoes industries, and has made profits from it through its huge young demographic dividend. Although Vietnam has carried out various reforms to obtain some outstanding economic data, it is still a country dominated by low-end manufacturing and has little added value.
Vietnam has a rich young labor force population dividend
Data shows that Vietnam is a coastal country with three times the sea area than land, with the population of coastal areas accounting for more than 50% of the country, and most workers engage in ocean-related occupations. Therefore, a major feature of Vietnam's economy is that the US dollar has high debt, mainly agricultural economy, relying heavily on foreign capital, and relying on low-end manufacturing to support the economy. Agriculture accounts for 30% of Vietnam's GDP and agricultural population accounts for 80% of Vietnam's total population.
At the same time, Vietnam's economic system has been transforming slowly. In the current environment of Vietnam's land prices, inflation and living costs, Vietnam's labor costs are increasing by nearly 10% to 20% each year, which is significantly higher than many Southeast Asian countries, and twice that of Laos and Myanmar . The investment in investment in building factories takes many years to recover, further compressing the company's profit expectations. Analysts believe that in the era of increasing economic uncertainty risks and intelligence in information, the sustainability of Vietnam's economic model is not strong.
This means that once the global economy slows down or there is a problem with Vietnam's domestic economic environment, Vietnam will exponentially amplify the impact of the external environment, and Vietnam's raw materials are basically purchased in the global market and are highly dependent on foreign markets. Based on this, analysts believe that Vietnam's economy may have a risk of recession.
Vice President of Bain Company Gerry Mattios said that Vietnam lacks infrastructure, and many factories producing low-value-added products are staggering, and Vietnam cannot become the next world factory. According to the explanation of the Vietnamese Minister of Planning and Investment, if Vietnam does not catch up with the Industry 4.0 train, the real gap between Vietnam and other countries will become wider and wider.
Global Asset Management Company Yingshiman warned that considering that Vietnam's limited foreign reserves can no longer cope with the sudden rise in US dollar lending costs, it is likely to become the "sacrilege" of the US dollar after the Fed's super aggressive interest rate hike and the US economy recession. may become the sixth country that may be "exploded" by the US aggressive interest rate hike after El Salvador , Ghana, Pakistan , Argentina and Turkey .
And behind this is that under the expectation of recession, combined with its own pressure of high inflation, high debt and high manufacturing costs, it began to transfer inflation and debt risks. In the vicissitudes of the world economy, the top predators are getting wealth from other countries, and the US dollar is such a "modern financial pirate". From now on, what is waiting for the Vietnamese economic market may be surging waves.
Although, the Vietnamese authorities approved the "Foreign Investment Cooperation Strategy 2021-2030" as early as June this year, with the goal of attracting high-tech and high-value-added investment projects to change their manufacturing industry's relatively low added value and their ability to connect to international supply chains.
However, according to a report released by the Vietnam Foreign Investment Bureau on September 18, Vietnamese companies invested nearly US$460 million in total investment in foreign companies in the first eight months of this year, a year-on-year decrease of 32.7%.
In this regard, some Vietnamese media said that Vietnamese companies hope to share China's economic development experience in innovation and sharing, and said that China has many places worth learning from in the Asia-Pacific countries. , which has more research on the Asian economy, Professor Robert Ross also analyzed that Vietnam needs China's funds and trade to develop its economy and manufacturing industry, and also needs China to provide help in many aspects including improving infrastructure, especially in financing for small and medium-sized enterprises in Vietnam. (End)
