Yuan’s global popularity will impact VN

The yuan joined the US dollar, euro, yen and pound sterling in the IMF’s special drawing rights list of currencies that countries can receive as part of IMF loans.
It marks the first time a new currency has been added since the euro was launched in 1999.
According to economist Nguyen Minh Phong, the change will have both positive and negative impacts on Vietnam’s economy.
He suspects China will now have to restrain its devaluation of the yuan in order to take more responsibility in applying policies to harmonise global benefits.
The expected stability of Chinese foreign exchange policies would benefit Vietnam’s economy.
If the yuan gains greater popularity and becomes more stable and healthy, Chinese and Vietnamese firms would not have to use the US dollar for payment.
The shift could also help stabilise the payment and trade relations between the two countries.
However, a high reserve of the yuan could create favourable conditions for China to dominate Vietnam’s currency policies.
Vietnamese firms would be at high risk of a Chinese takeover, as several of these companies are scheduled to be equitised.
The country should scrutinise the proportion of yuan in its reserves, he added.
However, expert Nguyen Tri Hieu pointed out that the impacts on Vietnam’s economy would be limited and indirect.
When the yuan joins the IMF’s basket and takes a new role in international payments, its value will increase. If the yuan’s value increases, the US dollar will devalue against the yuan.
Then Vietnam’s exports to China will have advantages, while its imports from the market will face disadvantages.
Vietnamese exporters and importers said the inclusion of the yuan in the IMF’s basket would not affect their trade in the short run.
Nguyen Van Sua, vice chairman of the Vietnam Steel Association, said that in the near future, several firms, including from Vietnam and China, would continue to use the US dollar for payment.
However, in the long run, a more prevalent yuan for payment would impact Vietnam’s exports and imports.
Once the yuan’s value and popularity increases, Chinese partners could suggest making more use of the yuan for making payments.
Prices of materials and equipment imported from China will increase, raising the prices of Vietnamese commodities.
To minimise the impacts, domestic firms should capitalise on the advantages offered by the free trade agreements that Vietnam has signed in order to diversify material import markets, he said.
Managing director Nguyen Thi Thu Hien of the Hanoi Trade Corporation said Vietnamese firms with trade ties with Chinese partners would benefit from the IMF’s decision, thanks to a more stable yuan.