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During China’s National People’s Congress, the government made it clear that boosting consumption is a top priority, mentioning it 27 times throughout the government work report. Despite lingering challenges, there are encouraging signs of recovery. Recent data shows that retail sales in the first two months of 2025 increased by 4.0%, beating market expectations and outperforming the 3.5% YoY growth seen in 2024. This positive momentum, coupled with an improved consumer confidence index as reported by the OECD, hints at better sentiment ahead.
Why it Matters for Vietnam
China’s renewed focus on consumption carries positive implications for Vietnam. As China is Vietnam’s second-largest export market, stronger consumer demand could translate into higher orders for Vietnamese products, bolstering export growth. Moreover, as Chinese consumption rebounds, the risk of Vietnam becoming a dumping ground for Chinese goods may diminish, reducing competitive pressure and potentially improving gross margins for local firms.
A prominent example is the paper industry, where we have witnessed Chinese FDI firms dumping products into the local market due to weak domestic consumption in China, negatively impacting Vietnamese producers’ gross margins. With consumer demand now picking up, this pressure could start to ease.
Moreover, as concerns grow over a potential US recession, China’s consumption revival could provide partial support to Vietnam’s economy, offering a valuable counterbalance amid external uncertainties.
