How Vietnam turned US-China competition to its advantage

The once-impoverished and war-stricken nation of Vietnam has emerged as a global pivot state, with 2023 being the year in which major investors and superpowers paid more attention to it than ever before.

Vietnam’s diplomatic success has been nothing short of breath-taking. Within a span of few months, it became the only country to serve as a state-visit destination for both US President Joe Biden and Chinese President Xi Jinping. While Mr Biden oversaw the elevation of bilateral ties to a “comprehensive strategic partnership”, Mr Xi ushered in a “golden era” of bilateral relations with his communist brethren to the south.

Just as crucial, however, is the South-East Asian nation’s fruitful wooing of global investors, including Big Tech companies from the West and China. Flushed with increasingly sophisticated investments from overseas, it is gradually building up its own industrial base. Its homegrown electric car dynamo, VinFast, has launched its first dealership in the US, the world’s most competitive automobile market, months after a successful New York Stock Exchange debut.

In August, the barely half-a-decade-old VinFast was the world’s third-most valuable automobile company, beating blue-chip German and Japanese manufacturers. As if that weren’t enough, Vietnam is also intent on building its own semiconductor industry, thus joining the global “Chip War” with gusto. By adopting an adept “bamboo diplomacy”, Vietnam has managed to benefit from both western and Chinese investments.

Crucially, economic boom also allows this non-aligned nation to modernise its armed forces and, accordingly, develop robust deterrence against external aggression. The leadership’s goal is to turn the country into a modern and self-reliant power in the Indo-Pacific.

Historically, few nations have had as turbulent a history as Vietnam. Throughout the past millennia alone, it has had to grapple with several invading empires, including Mongolians, the Chinese and the French.

In its struggle for survival, it was forced to develop a unique set of state institutions that have few parallels in the region. Practically all major South-East Asian kingdoms relied on a “Mandala” system of governance, namely a central authority exercising power through spheres of influence rather than direct control across a vast geographic expanse.

In Vietnam’s northern regions, however, increasingly sophisticated state institutions began to emerge, thus laying down the foundation for the conquest of southern polities, most notably the Indic Champa kingdom half-a-millennia ago.

Contemporary Vietnam often defines itself in opposition to its much larger neighbour, China. The cliche is that it fought an anti-colonial war against the Chinese for “a thousand years”. But as scholars such as Christopher Goscha have argued, Vietnam wouldn’t become a relatively monolithic and coherent nation-state until more recent times. If anything, various kingdoms in northern Vietnam lived, as eminent historian Keith Weller Taylor explains, in peaceful co-existence with China and were even “dependent upon a successful practice of mimicry” of it.

In fact, Vietnam relied on comprehensive Chinese strategic patronage – first under Kuomintang nationalists and later under Maoist forces – throughout the first half of the 20th century in order to drive away western empires from Indochina. And it was Chinese leader Deng Xiaoping’s market reforms that largely inspired Vietnam’s own post-Cold War “Doi Moi” (Renovation) economic liberalisation policies.

Vietnam’s contemporary strategic outlook, however, was shaped by traumatic events during the second half of the 20th century. At the height of the Cold War, and following a string of victories, it suddenly found itself facing both the West and China almost alone. By the 1980s, its Soviet ally was bogged down in Afghanistan, thus leaving Vietnam in a precarious position.

Following the end of the Indochina Wars, Vietnam had its “Never Again” strategic moment. Accordingly, it adopted a fiercely self-reliant national security doctrine that included “Four Nos”: no alliance with any foreign power; not siding with any superpower against the other; no foreign military bases; and no reliance on military force as a primary instrument of foreign policy.

Its pragmatic post-war leaders prioritised reconstruction and economic development and after decades of reforms, a new generation of relatively liberal leaders went so far as pursuing warmer ties with the West, including the US. The upshot was the full normalisation of bilateral ties with America and the gradual emergence of strategic partnerships with major western economies.

It also adopted a proactive trade policy, signing agreements with the US and the EU, and joining the Japan-led Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This went hand-in-hand with closer security co-operation with the US and the EU.

By building robust ties with the West, Vietnam sought to balance a rising China. When a trade war broke out between the world’s two superpowers, however, it emerged as an unlikely beneficiary. The West began relying more on Vietnamese exports amid its decoupling plans from China. Yet Vietnam also began to become more dependent on Chinese intermediate goods, capital and technology for its burgeoning manufacturing base.

The upshot was the emergence of a global pivot state that triggered a wave of courtship by both Washington, which seeks to enlist Vietnam’s support to hem in China, as well as Beijing, which seeks stable ties. By hosting Mr Biden and Mr Xi in quick succession, Hanoi showed a willingness to maximise ties with both superpowers, but it also signalled a determination to preserve its strategic autonomy.

Its communist leadership is intent on keeping a healthy distance from Washington, lest it risks western-backed colour revolutions at home or provoke Beijing. Economic boom in the past decade has birthed an increasingly large and cosmopolitan middle class. As a result, its security establishment is intent on preventing large-scale pro-democracy protests. No wonder, then, that during Mr Biden’s September visit to Hanoi, Vietnamese leaders enthusiastically welcomed expanded economic co-operation but largely shunned tighter military and political entanglements.

Just two months later, Vietnam hosted top Chinese leaders in order to dispel any suspicion of an alignment with the West. During Mr Xi’s visit, the two countries signed a series of co-operative agreements to maintain economic ties. Crucially, however, Vietnam made it clear it won’t sacrifice its territorial and maritime claims in the South China Sea, where it is at loggerheads with Beijing.

Thanks to its deft diplomatic manoeuvres, Vietnam has found itself in a strategic sweet spot. Large-scale investments from both the West and China are fuelling its rapid economic development. These allow it to not only enhance the welfare of its citizens, thus boosting the communist party’s legitimacy, but also provide significant resources for military modernisation.

Without a doubt, the new year will be filled with many geopolitical challenges, especially growing tensions between the US and China. But if there is one middle-sized country in East Asia that has shown an ability to hold its own in the face of manifold geopolitical challenges, that’s Vietnam.