The RCEP Agreement provides better conditions for Vietnamese enterprises to export goods to China through tax breaks, reduces the cost of importing goods from Vietnam to China and increa
Literature review
Foreign literature
Empirical studies indicate that trade liberalization significantly enhances economic growth through institutional advancements, capital accumulation, and improvements in industry structure and technology By embracing trade liberalization, countries engage more effectively in international markets, boosting exports that foster increased competition and higher productivity (Wagner, 2007).
Carmen Estrades and associates (2023) analyzed the economic impact of the Regional Comprehensive Economic Partnership (RCEP) by integrating the ENVISAGE computable general equilibrium model with microsimulation Their study assessed the economic performance of RCEP implementation, including tariff reductions and non-tariff measures, alongside the enforcement of rules of origin The findings indicate that reducing trade costs and enhancing productivity will significantly boost regional trade among RCEP member countries.
The Global Trade Analysis Project Model (GTAP) has been utilized to evaluate the economic impact of the Regional Comprehensive Economic Partnership (RCEP) on member countries under various scenarios, as demonstrated by Petri & Plummer (2013) Additionally, Ken Itakura (2015) employed the GTAP model to analyze the effects of RCEP on the economies of ASEAN member nations.
Ken Itakura (2019) evaluated the effects of the Regional Comprehensive Economic Partnership (RCEP) following India's withdrawal, revealing that the agreement continues to provide advantages to the remaining 15 member states despite the reduced size.
Research in Vietnam
Nguyen Tien Dung (2018) highlighted that trade liberalization under the Regional Comprehensive Economic Partnership Agreement (RCEP) could significantly benefit Vietnam by increasing GDP, boosting private consumption, and enhancing exports Additionally, Vu Thi Yen (2023) identified key factors affecting Vietnam's trade turnover with RCEP partner countries, such as the population size and GDP of both Vietnam and the RCEP nations.
In his 2021 study, Le Son Tung employed the Delphi method to analyze the effects of the RCEP agreement on Vietnam's export and import activities, focusing on key Vietnamese goods traded with member countries.
Nguyen Thi My Hang and Nguyen Minh Thuy (2020) conducted research on the status and development solutions for the Vietnamese coffee industry Additionally, Nguyen Minh Thoai, Nguyen Thi Lai, and Phan Thi Phuong Linh assessed the competitiveness and market share of Vietnamese coffee import-export activities.
From 2004 to 2023, the US market has been analyzed in comparison to global counterparts using the Revealed Competitiveness Index (RCA) and the Market Share Index (MS), with data sourced from the International Trade Center This comprehensive evaluation highlights the competitive landscape of the US in relation to other countries, providing insights into market dynamics and trends over the two-decade span.
Tran Nhuan Kien, Ngô Thi My (Ministry of Science and Technology, 2016) with the research: Vietnamese coffee export status and policy suggestions
Thuy Dung Vo, Laike Yang, and Manh Dung Tran from East China Normal University conducted a study in 2023 examining the determinants influencing Vietnam's coffee exports Utilizing panel data and a Spatial Gravity Model, the research aimed to assess the impact levels of various factors on Vietnam's coffee export performance, while also considering the spatial dependencies inherent in the gravity model.
Aims of research
The Regional Comprehensive Economic Partnership (RCEP) Free Trade Agreement (FTA) significantly impacts Vietnamese goods, particularly coffee exports to China As RCEP is enforced from 2025 to 2030, it presents opportunities for Vietnam to enhance its coffee export strategies To capitalize on this, Vietnam should focus on improving product quality, diversifying coffee offerings, and strengthening marketing efforts in the Chinese market Additionally, fostering partnerships with Chinese distributors and leveraging digital platforms for outreach can further boost Vietnamese coffee's presence in China.
First, review the theory on management of international business and the impact of policy on export of goods of enterprises
Second, analyzing the impact of RCEP FTA on the export of Vietnamese coffee from Vietnam to China market
Third, analyze the context, orientation then propose some solutions for promoting the exporting Vietnamese coffee to China in the RCEP enforcement‟s context
Objects of research
Research objects: Focus on impact of policies and RCEP on export enterprises and their activities in exporting Vietnamese Coffee to the Chinese Market during the period of 2022-2024
And the factors that would impact on export enterprises and their activities in exporting Vietnamese Coffee to the Chinese Market during the period of 2025-
Scope of research
The article examines the current state of Vietnamese cargo exports to China, aiming to estimate the potential export levels and evaluate the impacts of the RCEP Free Trade Agreement on these exports The author utilizes data from various sources, including Vietnam, China, and other global nations, to support the analysis.
Time: RCEP FTA‟s impacts on Vietnam‟s export of goods to China between 2013 and 2023
This thesis examines the effects of the RCEP Free Trade Agreement on the export of Vietnamese goods, specifically targeting Vietnamese coffee exports to China It also proposes strategic solutions to enhance the export of Vietnamese coffee to the Chinese market.
Research methodology
Method of data collection
This study employs an indirect data collection method to comprehensively analyze the impact of the RCEP FTA on the export of Vietnamese agricultural products to China from 2013 to 2023 The data is sourced from reputable organizations to ensure accuracy and reliability.
- Export, import figures are collected from General Department of Customs,
UN Comtrades General Statistics Office, Ministry of Industry and Trade, statistical data
- Tariff figures (export and import tax) of Vietnam and its partner countries from World Integrated Trade Solutions (WITS) database.
Analysis Method
Qualitative analysis is a crucial method in socio-economic studies, focusing on identifying complex issues that may not be easily quantified This approach is particularly relevant in evaluating the trade impacts of free trade agreements (FTAs) between nations, supplemented by a realistic observation of various influencing factors To effectively implement this analytical method, the author employs analytical, synthetic, statistical, and comparative approaches tailored to the research problem Notably, the analysis and synthesis method is primarily utilized to gather information on the factors affecting trade activities between two countries before and after the FTA is established.
First, the analysis and synthesis method: Author uses qualitative analysis method to explain, research figures and goods exporting activities from Vietnam to China
Authors employ statistical and comparative methods, utilizing figures, graphs, tables, and charts to analyze the status of goods exports from Vietnam to the Chinese market and other countries Key statistical indicators, including share, average, growth rate, turnover, and item structure (quantity and price), are examined before and after the implementation of the free trade agreement This analysis enables a comprehensive assessment of the Agreement's impacts on export performance.
The quantitative analysis method serves as a vital tool in socio-economic research, encompassing various techniques to uncover patterns and relationships It includes a comparative method that evaluates the trends in export and import activities between two countries, calculating trade indicators to identify correlations and comparative advantages Additionally, the descriptive statistical method is employed to analyze the fundamental characteristics of collected data, such as standard deviation, minimum, maximum, and average values, providing insights into the import and export dynamics Building on comparative advantage theory, Liesner (1958) assessed a country's comparative advantages through its export analysis, highlighting that a nation's primary exports typically reflect its areas of comparative strength.
Balassa further perfected this assessment and gave the existing comparative advantage factor (RCA) RCA is calculated by formula:
The RCA, or comparative advantage coefficient, reflects the export performance of country i in product j It is calculated using the export turnover of product j from country i relative to the country's total export turnover Additionally, it considers the export turnover of product j from the top six countries exporting coffee to the Chinese market, compared to their total export turnover This metric helps assess the competitive position of countries in the coffee export sector to China.
If RCA > 1 then country i has a comparative advantage over product j
If RCA < 1 then country i has no comparative advantage over product j To specifically assess the level of comparative advantage, the RCA coefficient is divided into 4 groups
Table 1: Classification of comparative advantages through RCA coefficient
No Group The comparative advantage’s level
1 0 < RCA ≤ 1 There is no comparative advantage
3 2 < RCA ≤ 4 The average comparative advantage
In conclusion, Author use the secondary sources of data for the calculation and estimation as research methodmelogy
7 The thesis has below sections:
OVERVIEW OF RESEARCH
Theory of exporting goods
1.1.1 Concept and forms of goods export
The export of goods refers to the act of transporting goods out of Vietnam or into designated special zones within the country, which are classified as exclusive customs zones under legal regulations.
In international trade, the currency used for transactions can vary, being the currency of the buyer, the seller, or a third country For instance, when Vietnam exports goods to the United States, the payment is made in USD, which serves as a foreign currency for Vietnam but is the domestic currency for the US Conversely, if Vietnam exports goods to China and the payment is again in USD, the USD acts as a foreign currency for both Vietnam and China.
1.1.1.2 The role of exporting goods
Exporting plays a crucial role in expanding markets beyond national borders, benefiting both businesses and countries It enhances domestic production by leveraging absolute and comparative advantages, while also generating foreign currency and stimulating import activities This macroeconomic benefit is vital for maintaining a balanced payment system and bolstering foreign currency reserves Additionally, exporting fosters diplomatic relations and economic cooperation, laying the groundwork for long-term trade partnerships globally.
Exporting offers significant advantages for individuals and businesses, including increased revenue, sales growth, market diversification, and expanded output By selling to foreign customers, companies can extend their reach beyond national borders, thereby enhancing the overall competitiveness of domestic businesses This practice is a key benefit of international trade, as exports play a vital role in promoting national brands on the global stage Large companies that export valuable products not only gain market dominance but also strengthen their brand identity internationally.
A country with numerous strong brands can effectively enhance its own national brand, as evidenced by major companies like Toyota from Japan, Apple from the USA, Samsung from Korea, and Alibaba from China Additionally, exports play a vital role in generating employment opportunities and boosting the country's prestige and influence in importing markets.
In general, Export brings an abundant resource of foreign currency, large revenues and plays a huge role in the economy of a country and increases the relationship between countries
1.1.1.3 Forms of export of goods
The forms of export of goods include:
1.1.3 Factors affecting the export of goods
Several factors influence the export of goods, encompassing both internal elements related to the exporting country and external influences A theoretical analysis can identify key factors that significantly impact the export process.
1.1.3.1 Factors that affect the country’s supply and demand for goods exports a) The size of the economy
The income level of an exporting country can be evaluated through its Gross Domestic Product (GDP), which reflects the export supply capacity An increase in the total value of goods and services produced within a country's borders indicates a rising supply of goods, thereby enhancing the country's potential for increased exports Additionally, population dynamics play a crucial role in influencing export capabilities.
As the population grows, the expanding labor force enhances production capacity and boosts export volume However, this rise in exports intensifies competition among businesses, driving domestic enterprises to innovate techniques, increase productivity, enhance quality, and diversify their product offerings.
The growth of supply significantly enhances export conditions, while the demand for labor is increasing in both quantity and quality As advancements in technical science progress, skilled labor is progressively replacing unskilled workers Therefore, it is crucial to consider both the quantity and quality of labor to achieve a comprehensive and accurate reflection of export capabilities Consequently, the population of the exporting country, which serves as the labor source, positively influences its export potential, alongside the necessary infrastructure for export operations.
The infrastructure significantly influences export efficiency, including factors like warehouse systems and loading equipment A well-organized infrastructure, especially in high-density, high-income areas with convenient transportation, provides businesses with a competitive edge Modern seaport facilities minimize unloading times and streamline delivery processes, ensuring the safety of export goods Advances in science and technology drive the development of innovative products and manufacturing processes, enhancing product quality and productivity As technology evolves, export enterprises face both opportunities and challenges, making it crucial to adopt new technologies and engineering advancements This approach enables businesses to produce higher quality products at lower costs, aligning with consumer preferences and ultimately boosting competitiveness and profitability.
Science and technology significantly enhance sectors like freight transport, commodity preservation, and banking, leading to their expansion and improved export capabilities Additionally, advancements in information technology and electronic commerce have removed geographical and temporal barriers, facilitating swift, convenient, and cost-effective commercial transactions This progress is crucial for the development of logistics systems.
Logistics services has an huge role in connecting, supporting and developing socio-
Logistics plays a crucial role in the global economy by facilitating the importation of raw materials, enabling the production of goods, and ensuring efficient distribution to final consumers As the backbone of international trade, logistics services are essential for connecting domestic manufacturing industries with regional networks By enhancing the quality of logistics, countries can significantly boost their import and export activities, particularly in terms of exports, ultimately improving the overall quality of goods in the market.
Product quality is determined not only by its physicochemical characteristics but also by the quality of its packaging, design, and alignment with consumer preferences Additionally, product quality is closely linked to the quality of the accompanying service, highlighting the importance of a holistic approach to product and service excellence.
The quality of export products is significantly affected by varying consumer preferences across different regions, technological advancements, and product quality standards To gain a competitive edge in export activities, businesses must develop high-quality, unique products tailored to the tastes of local consumers while adhering to international standards and providing excellent accompanying services Ultimately, product quality plays a crucial role in enhancing the competitive advantage and market share of export enterprises.
As society evolves and incomes rise, consumers increasingly prefer high-quality products over cheaper alternatives Quality has consistently been a crucial factor influencing the competitiveness of Vietnamese exports, highlighting its significance in the marketplace Additionally, the relative pricing of goods plays a vital role in consumer choices and overall market dynamics.
The impact of free trade agreements between countries
A Free Trade Agreement (FTA) is an international arrangement among countries and territories aimed at liberalizing trade for specific commodity groups By following a strategic roadmap, member nations work to reduce and eliminate both tariff and non-tariff barriers, thereby promoting the creation of a free trade area This facilitates the exchange of goods, services, and investments among participating members, as noted by the Vietnam Institute of Strategy and Policy for Industry and Trade (MOIT).
1.2.1.2 Free Trade Agreement between China and Vietnam
The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement involving 10 ASEAN nations and five partner countries: South Korea, New Zealand, Japan, Australia, and China This landmark agreement is set to represent approximately 30% of the world's gross domestic product (GDP), establishing it as the largest trading bloc in history, according to the Vietnam Institute of Strategy and Policy for Industry and Trade (MOIT).
The Regional Comprehensive Economic Partnership (RCEP) was initiated in 2012 in Phnom Penh, Cambodia, with India participating, and reached near completion by the end of 2019 However, India ultimately withdrew from the agreement during the final stages The negotiation process involved 31 rounds and aimed to establish a comprehensive economic partnership among six regional partners and ASEAN RCEP aligns with Vietnam's vision of enhancing economic integration while implementing robust domestic reforms.
The Regional Comprehensive Partnership Agreement (RCEP), signed on November 15, 2020, during the 37th ASEAN Summit in Hanoi, unites 15 countries, including 10 ASEAN nations, China, Japan, South Korea, New Zealand, and Australia Officially effective from January 1, 2022, RCEP establishes the world's largest free trade area, aiming to eliminate up to 90% of tariffs among its members over 20 years With a combined population of 2.2 billion, representing about 30% of the global population, and a GDP of approximately USD 32 trillion, or 32% of the world's GDP, RCEP significantly impacts global trade dynamics.
The RCEP agreement, now signed and implemented, establishes the world's largest free trade area, encompassing 15 countries that represent 32% of global GDP, approximately $332 trillion This agreement is expected to boost the GDP of its member nations by an estimated $137 billion, marking a significant milestone as countries work towards recovery from the COVID-19 pandemic.
1.2.2 The Static Impact of Free Trade Agreement
The trade agreement aims to enhance economic restructuring and optimize resource allocation among Member States by eliminating tariff barriers for them while maintaining these barriers for non-member states It also encourages foreign direct investment (FDI) and promotes trade and economic cooperation Economists analyze the effects of Free Trade Agreements (FTAs) through "trade creation" and "trade diversion." Trade creation occurs when a Member State opts to import lower-cost goods from another Member State instead of producing them domestically at a higher cost Conversely, trade diversion happens when a member country imports more expensive goods from another member state rather than sourcing from a lower-cost non-member country, influenced by the incentives within the trade bloc.
Trade creation resulting from Free Trade Agreements (FTAs) allows member countries to benefit from preferential treatment, including reduced or eliminated tariff barriers, leading to lower import prices compared to domestically produced goods This reduction in costs enhances the net benefits for countries involved in the agreement Furthermore, the positive effects of FTAs on trade creation extend to non-member countries, as decreased import prices contribute to an increase in real income and overall welfare.
The consumption demand of member countries leads to increased imports and trade The signing of Free Trade Agreements (FTAs) not only creates trade opportunities but also results in trade diversion In non-member countries, goods of similar quality with lower production costs typically export to each other However, once a country joins an FTA, it tends to import goods from within the bloc, even if those goods have higher production costs, due to tax incentives that keep prices competitive This trade diversion negatively impacts non-member countries, effectively creating discrimination in international trade relations Consequently, this situation compels non-member countries to seek negotiations for FTAs or to establish new agreements Ultimately, FTAs provide numerous advantages to member states while influencing the policies of both member and non-member countries.
Trade diversion disrupts the benefits of comparative advantage, leading to inefficient resource allocation on a global scale Manufacturers are compelled to allocate more resources to non-member countries to maintain export levels to member states, ultimately diminishing overall productivity and efficiency Additionally, producers from outside the trade agreement face competitive disadvantages due to the lack of preferential treatment, resulting in significant losses Consequently, trade deflection undermines the advantages for both member states and the welfare of non-member countries.
In conclusion, the effects of "trade creation" and "trade diversion" will reshape the distribution of production forces across the economy, leading to the establishment of a new economic structure driven by commitments among countries involved in Free Trade Agreements (FTAs) This dynamic creates a form of discrimination in international trade, incentivizing non-member countries to negotiate for FTA membership or pursue new FTAs Consequently, the signing of an FTA significantly influences the interests and policies of both member and non-member states.
1.2.3 The impact of free trade agreement
The long-term effects of the Free Trade Agreement (FTA) on the economy encompass both dynamic and enduring impacts, as the economy adjusts to shifts in related factors.
The implementation of Free Trade Agreements (FTAs) involves 20 key policies aimed at harmonizing macroeconomic strategies, driving reform, and enhancing the legal framework The long-term effects of these agreements are significant, as they expand markets, boost competition, and attract investment, leading to increased market size and diversity This growth presents manufacturers with new opportunities to develop their businesses Additionally, from a state management perspective, countries need to establish policies that foster sustained trade flow increases The long-term impacts of FTAs are largely derived from global economic integration through trade agreements that eliminate barriers, facilitating cross-border goods movement The influence of international trade liberalization, initially noted by Balassa (1961) and supported by numerous empirical studies, primarily manifests in economic expansion, technology transfer, foreign direct investment, and enhanced specialization within the global production value chain (Krugman et al., 2012).
The Free Trade Agreement (FTA) promotes productivity gains by reducing tariffs between member countries, enabling them to scale up production and lower costs This increased economic efficiency leads to enhanced productivity and market expansion through technological advancements (Eicher et al., 2009; Plummer et al., 2010) Economies of scale are particularly beneficial in manufacturing, agriculture, natural resources, and the service sector By creating larger markets, the FTA empowers producers to leverage market strength, resulting in lower prices for consumers and heightened competitiveness both domestically and internationally (Corden, 1972) Additionally, the specialization of production allows countries to capitalize on their comparative advantages, effectively utilizing resources and providing consumers with a diverse range of goods and services.
The signing of FTAs provides opportunities for domestic enterprises to access
Member countries are encouraged to open their markets to international partners, fostering competitive pressure on domestic businesses, particularly in developing nations This competition can lead to the exit of underperforming companies, leaving only the most efficient and innovative businesses to thrive To succeed in this challenging environment, domestic firms must focus on technological innovation, operational efficiency, and improving their overall competitiveness.
Countries involved in Free Trade Agreements (FTAs) are keen to boost exports and access member markets, fostering intra-industry trade and encouraging intra-bloc investment By reducing investment barriers and providing incentives, capital flow shifts among member nations, allowing businesses to leverage a broader market at lower costs and benefit from economies of scale This leads to an "investment creation" effect, enhancing opportunities for member economies while intensifying investment competition Additionally, FTAs facilitate "direct investment," enabling businesses from one member country to invest in another more effectively, while also enhancing investment prospects in non-member nations The removal of trade barriers allows member enterprises to trade freely, opening doors to new markets with favorable conditions As market size expands due to increased demand and diversity, manufacturers can grow their businesses, prompting countries to develop supportive policies that promote sustainable trade flow growth in the long term.
THE EXPORT STATUS OF VIETNAMESE COFFEE TO CHINA
Current status of coffee export from Vietnam to China
2.1.1 Export of goods from Vietnam to China
Since the establishment of a comprehensive strategic partnership in 2013, trade between Vietnam and China has flourished Vietnam's exports to China surged from $13.17 billion in 2013 to $61.20 billion in 2023, reflecting a remarkable growth rate of 44.5% Notably, the export value from Vietnam to China surpasses that of China's exports to Vietnam, with growth rates of 68% for Vietnam compared to 60% for China.
Figure 2.1: Vietnam export turnover to China (mil USD)
Source: General Department of Vietnam Customs
Vietnam's trade turnover to China in the period before the agreement from
2013 to 2015 reached 16.56 billion USD and tended to increase slightly each year
Total Viet Nam export turnover (tỷ USD) Vietnam export turnover to China (tỷ USD) Density rate
In the aftermath of the 2008 global economic crisis, Vietnam's economy faced challenges due to lower global growth and trade disruptions, given its high level of integration and openness During this time, China emerged as a significant trade partner for Vietnam, contributing to 20% to 30% of the country's trade turnover Notably, Vietnam's export turnover in 2013 reached 13.17 billion USD, reflecting a growth of 0.34 billion USD compared to 2012.
In 2014, Vietnam experienced a significant increase in exports to China, reaching 1.75 billion USD compared to 2013, with a steady rise in subsequent years Key exports from Vietnam to China include textiles, footwear, electronics, components, and computers In 2017, both countries committed to enhancing their economic and trade cooperation by signing a "5-Year Development Plan for Vietnam-China Economic and Trade Cooperation" covering 2017 to 2021 This plan aims to strengthen trade, investment, and infrastructure collaboration, ensure trade balance, and foster cooperation in various strategic sectors.
In 2018, the trade turnover between Vietnam and China reached nearly $107 billion, marking a 13.5% increase from 2017, with exports exceeding $41 billion, a rise of nearly 17% By 2020, bilateral trade turnover grew to $133 billion, reflecting an 18.7% increase, while Vietnam's exports approached $48.9 billion, up nearly $7.5 billion compared to 2019, according to data from China Customs.
In 2021, the trade turnover between Vietnam and China reached $165.9 billion, marking a 24.6% increase from 2020 and representing a significant portion of China's total trade with ASEAN By 2022, China remained Vietnam's largest export market in Asia and the second largest globally, with exports to China totaling $87.96 billion From 2013 to 2022, Vietnam's exports to China experienced remarkable growth, increasing more than fourfold from $13.17 billion to $57.67 billion This growth rate outpaced Vietnam's average export growth rate to the world during the same period, with China accounting for nearly one-third of Vietnam's total export turnover to Asia and 18.73% overall.
26 its export turnover to the world Import turnover of goods from Vietnam contributes 3.24% of the total import value of goods of this country (ITC Trademap,
In 2023, the trade relationship between China and Vietnam has proven to be vital in the global market, with China standing out as one of Vietnam's key trade partners Over the years, this relationship has experienced substantial growth, as Vietnam exports a range of significant products to China, including electrical machinery, footwear, coffee, tea, rubber, wood, cotton, seafood, and textiles These industries are labor-intensive, highlighting their importance to Vietnam's economy.
Overview of China‟s coffee market
China's economy has shown a strong recovery following the disruptions caused by the COVID-19 pandemic, achieving a growth rate of over 8% in 2021 Although growth slowed to 3% in 2022, real GDP rebounded with a 5.2% increase in 2023 Key factors contributing to this recovery include enhanced tax relief, a rise in private consumption, and the easing of monetary policy.
Chinese coffee market reached USD 2,06 billion by 2023 It is expected to reach USD 2,26 billion by 2028, reaching a CAGR rate of 1,90% in the forecast period (2023-
The demand for coffee in China is rising significantly, driven by the expansion of both domestic and international coffee brands, such as Luchin Coffee and Starbucks, making coffee more accessible and familiar to consumers Additionally, the perception of coffee as a healthy choice when consumed in moderation has further boosted its popularity Furthermore, the growth of e-commerce platforms has facilitated easy access to high-quality coffee for consumers.
Tea remains a traditional beverage in China; however, coffee consumption is rapidly rising, particularly among commuters and in urban regions The Chinese Coffee Association Beijing (CCAB) reports that coffee consumption is growing at an impressive annual rate of 15%.
The instant coffee segment holds a significant market share due to its convenience Moreover, growing household spending by middle-class consumers, changing
The demand for instant coffee in China is rising, driven by changing lifestyles and a preference for Western cultural trends To cater to this growing market, instant coffee makers are introducing a variety of flavored products to attract a broader audience While online retail has been a minor distribution channel, it presents significant growth potential as consumers seek convenience and a wider selection of brands Product innovation is crucial for market expansion, with companies differentiating their offerings to reach new customers For instance, in August 2022, the premium brand Zhongxuegao launched a unique coffee product combining almond-flavored cream and yogurt with cold brewed coffee at nearly 600 cafes This trend has led to the introduction of various ready-to-drink coffee cocktails by numerous brands, reflecting the increasing consumer interest in both coffee and ready-to-drink products.
2.1.2 The situation and trend of coffee consumption of the Chinese market
Yunnan and Hainan are the two primary southern provinces for commercial coffee production in China, with Yunnan accounting for 60% of the country's coffee output, while Fujian Province contributes a smaller quantity Recently, the Yunnan local government established the Coffee and Tea Industry Bureau to promote Yunnan coffee in both domestic and international markets.
China's coffee production remains significantly lower than that of other countries, with the USDA reporting only 1,800 thousand 60-kg bags produced in 2020, compared to 3,804 thousand bags imported To address this gap, it is crucial for both the government and producers to enhance investment in research and development activities and implement effective strategies to boost domestic coffee production.
China's retail e-commerce sales have surged, reaching USD 2.77 trillion in 2021, marking a 20% increase from the previous year, according to the International Trade Administration Additionally, the World Bank reports that 73% of the Chinese population are active internet users, contributing to the growth of online shopping in the country.
A 2020 joint survey by Alibaba and Ele reveals that China's growing retail e-commerce and internet usage are significantly boosting online instant coffee purchases Since 2019, online coffee buying in China has surged by 1.5 times, with instant coffee representing 13.5% of the overall coffee market.
2.1.3 Coffee supplies in the Chinese market
The Chinese coffee market is becoming increasingly competitive, driven by both global and local businesses that are innovating in packaging and product offerings to cater to diverse consumer needs Companies are leveraging social media and online distribution channels to effectively market their products As coffee consumption continues to rise, there is a surge in investment from both local and international firms to expand production facilities across the country China primarily imports coffee from South America and Africa, with Brazilian coffee exports to China nearly tripling in 2023, surpassing 1,000,000 bags for the first time, positioning China as the eighth largest coffee market globally.
Key players in the Chinese coffee market include Nestle SA, Starbucks Coffee Company, JAB Holding Company, Gloria Jeans, and Luigi Lavazza SPA The number of coffee shops in China has surged by 58% over the past year, reaching a total of 49,691, as reported by Alegra Group This growth is largely driven by the expansion of local chains, with Luckin Coffee opening 5,059 new stores and Cotti Coffee adding 6,004 locations in 2023.
In 2023, Starbucks expanded its presence in China by opening 700 new stores and aims to reach a total of 9,000 locations by 2025 Meanwhile, Canadian coffee chain Tim Hortons has announced plans to establish 3,000 stores in China over the next four years, highlighting the growing competition in the Chinese coffee market.
2.1.4.1 Generalization of Vietnam’s ability to produce, supply coffee
Vietnam's Coffee - Cocoa Association (Vicofa) reports that coffee prices have surged due to a significant supply shortage Historically, Vietnam maintained an inventory of approximately 120,000-150,000 tons of coffee annually; however, for the 2022-2023 period (from October of the previous year to September of the following year), this inventory has drastically declined.
In 2023-2024, coffee inventory levels are significantly low, at just 50% of last year's figures Additionally, production is projected to decline by 10% as a result of climate change, particularly due to the El Niño phenomenon, which is causing drought conditions across key coffee-growing regions.
Vietnam ranks as the world's second-largest coffee exporter and is the top producer of Robusta coffee For the past decade, coffee has consistently been a key agricultural export for the country, generating billions in revenue annually The coffee export target for 2024 is set at $5 billion, with major importing countries including Japan, China, the Philippines, the USA, and the EU.
In June 2024, coffee exports fell by 40% year-on-year to 84,600 tons; however, the turnover value reached a remarkable 300 million USD The Ministry of Agriculture and Rural Development attributes this to a more than 50% surge in export prices, setting a new record Additionally, the estimated output of Vietnamese coffee for the 2023-2024 season is projected to decline to 1.47 million tons, the lowest in four years, creating pressure on the global Robusta supply.
Analysis of Vietnamese coffee competitiveness in the Chinese market
Vietnam's coffee exports to the Chinese market have shown a significant upward trend from 2013 to 2023, with export values rising from 80.17 million USD in 2013 to a peak of 151.97 million USD in 2023 This growth positions Vietnam as the second-largest coffee exporter to China, benefiting from the RCEP FTA and improved market insights that enable exporters to optimize profits Despite a sharp decline in export value from 126.81 million USD in 2018 to 75.58 million USD in 2019, attributed to the global impact of the Covid-19 pandemic, Vietnam's coffee exports rebounded in 2021, reaching 128.50 million USD and continuing to grow thereafter.
In 2023, Vietnam remains one of the top five countries exporting coffee to China, maintaining a strong position despite fluctuations in export levels The country is competing closely with Indonesia for the second spot in the market, following Brazil, which holds the top position.
Figure 2.5 Coffee import turnover of China (Mil $)
Source: General Department of Vietnam Customs and China Customs Department
Analyzing RCA, we have figure:
Figure 2.6 RCA of 5 main exporting countries in China
The analysis RCA results show that Vietnam coffee products have a good
China coffe market's total import turnover
2013 2014 VN 2015 Brazil 2016 2017 Columbia 2018 2019 Indonesia 2020 India 2021 2022 2023
Indonesia's RCA value for coffee indicates that it does not surpass that of Brazil or Colombia, highlighting Vietnam's coffee as less competitive compared to these two leading exporting nations.
Vietnam's average Revealed Comparative Advantage (RCA) value stands at 19.49, indicating a need for improvement in its comparative advantage In contrast, Colombia leads with the highest RCA of 30.44, while Brazil also surpasses Vietnam in RCA, highlighting their competitive edge Within Southeast Asia, Indonesia poses a significant challenge to Vietnam, which must enhance its position Notably, Colombia's dominance in high-value Arabica coffee further distinguishes it from Vietnam's focus on Robusta coffee.
Vietnam and China maintain a traditional trade partnership rooted in a comprehensive strategic alliance; however, their trade turnover remains below expectations, not reflecting the depth of this relationship Analysis of the export intensity index from 2013 to 2015 reveals that Vietnam's export intensity to China consistently falls below 1 This situation is influenced by Vietnam's active participation in various international economic organizations and its numerous bilateral and multilateral trade agreements, which have broadened its export markets Consequently, during this period, the growth rate of Vietnam's exports to China lagged behind the overall growth rate of its exports to the global market.
Figure 2.7 Coffee Vietnam‟s Export Intensity Index
Source: Author calculated from ITC 2023 data
Vietnam's export intensity also tends to increase from 2016 to 2022, the XII index is always above 1 (the lowest is 1.24 and the highest is 1.57), showing that
China's significance in Vietnam's international trade is on the rise, even as Vietnam engages in trade with various global partners and faces competition from major trading allies with existing free trade agreements, such as Korea and ASEAN nations The increasing XII index during the latter part of the research period indicates a growing dependency of Vietnam's imports on China Despite a steady increase in Vietnam's export turnover since the RCEP agreement's implementation in 2013, the growth does not fully align with Vietnam's potential This underscores the need for Vietnam to enhance its export activities to the Chinese market.
Assess impact of RCEP FTA on coffee export from Vietnam to China
2.3.1.1 Trade agreements help increase export turnover and facilitate the export of Vietnamese coffee to China
The Regional Comprehensive Economic Partnership (RCEP) significantly enhances trade between member countries by implementing a 20-year tariff reduction plan that aims to eliminate 90% of import taxes This commitment to reducing existing tariffs is expected to boost the export turnover of Vietnamese goods, particularly increasing the export of Vietnamese coffee to China.
Figure 2.8 Schedule of China‟s Tariff Commitment for Vietnam Coffee in RCEP
Coffee, not roasted, not decaffeinated Coffee, not roasted, Decaffeinated Coffee, roasted, Not decaffeinated Coffee, roasted, Decaffeinated Coffee husks and skins Coffee substitutes containing coffee
Source: Ministry of Industry and Trade
Since the implementation of RCEP, Vietnamese coffee products have seen significant changes in import duty taxes in China Previously, all Vietnamese coffee faced an 8% import duty, but as of 2022, non-roasted and decaffeinated coffee now incur a reduced tax of 5%, while roasted coffee, whether decaffeinated or not, is exempt from duties altogether, down from 15% Additionally, coffee husks and skins, which previously faced a 15% duty, are now also duty-free Furthermore, coffee substitutes that contain coffee will have their duty exemptions phased in, reaching 0% by 2042.
Before the implementation of RCEP in 2022, Vietnam's export turnover to China was 55.93 billion USD However, exports to China have shown significant growth, reaching 57.5 billion USD in 2022 and projected to increase to 61.2 billion USD in 2023.
The RCEP Agreement serves as a crucial legal framework that enhances the trade position of Vietnamese enterprises, enabling them to boost exports and penetrate larger consumer markets By reducing costs and improving competitiveness, Vietnam gains access to the extensive supply chain of China and the Asia Pacific region, which offers significant market potential for its export products As China remains a traditional partner, the comprehensive strategic cooperation under the agreement further strengthens investment and trade ties The RCEP also simplifies Rules of Origin, allowing for the accumulation of originating materials from member countries, which helps Vietnam import raw materials at competitive prices for processed coffee production This ultimately enhances the competitiveness of Vietnamese coffee products and increases exports to China.
Evidence for this one is showed in Circular Number 05/2022/TT-BCT of Ministry of Industry and Trade:
- Appendix I: Specific rules for goods
- Appendix II: List of minimum information of certificates of origin of goods
- Appendix III: Sample C/O for RCEP export and sample C/O supplementary declaration
- Appendix IV: List of goods subject to conditional tax differences
2.3.1.2 RCEP promotes exports of goods with Vietnam's competitive advantage over China
The RCEP Agreement has significantly expanded trade between Vietnam and China over the past two years, focusing on complementary products Both nations are capitalizing on their competitive advantages, with Vietnam exporting goods like footwear, textiles, and agricultural products, while China supplies essential inputs such as chemicals and electronics The implementation of RCEP is expected to enhance Vietnam's economy by improving the business environment, optimizing resource allocation, and fostering economic restructuring towards higher value-added goods This agreement will also facilitate tariff reductions and create a more complementary trade structure, ultimately benefiting both countries.
The "trade creation" effect has significantly boosted trade between Vietnam and China, particularly in coffee exports where Vietnam holds a comparative advantage Following the agreement, Vietnam's coffee products have benefited from preferential tariff reductions, leading to an average export turnover increase of 12.5% from 2013 to 2021 Consequently, there has been a noticeable upward trend in coffee exports to China since the agreement took effect.
The RCEP agreement has led to a significant increase in Vietnam's economic growth, with rates rising from 10.04% to 12.5% Additionally, it fosters specialization and economies of scale, boosting productivity and efficiency in Vietnam's key industries.
Figure 2.9 Vietnam coffee export turnover to China
Source: General Department of Vietnam Customs
Vietnamese coffee represents a significant portion of plant product exports, averaging 12.5% from 2013 to 2021 Following the implementation of a trade agreement, exports to China have risen, with the average export share increasing from 10.94% to 12.5% The total export value for fruit and vegetable products surged from $5.06 billion in 2020-2021 to $6.79 billion in 2022-2023, marking a 34.18% increase Similarly, coffee exports grew from $2.97 billion to $3.73 billion, reflecting a 25.58% rise.
China is emerging as a consumption-driven society, presenting significant opportunities for imported goods from Vietnam, particularly in the coffee sector Key purchasing factors for Chinese consumers and businesses include product quality and brand reputation, alongside a strong focus on price As Chinese consumers increasingly seek high-quality, innovative, and health-conscious products, this trend creates a favorable environment for Vietnamese coffee exports to thrive in the Chinese market.
Total Export volumme of Viet nam coffee to China(thousands ons) Total export turnover of Vietnam coffee to China (mil $)
2.3.1.3 RCEP clearly establishes and harmonizes rules of origin, requirements on technical barriers to trade, and plant quarantine to control the quality of goods
The RCEP agreement significantly streamlines the process for ASEAN countries by replacing the five separate FTAs with a unified set of rules of origin, allowing goods to benefit from tax incentives more easily Notably, Vietnamese enterprises can now treat raw materials imported from RCEP nations as locally sourced when exporting processed coffee, alleviating challenges related to material origins and reducing production costs The agreement establishes stringent regulations covering rules of origin, quality standards, pricing, food safety, and customs procedures, ensuring a robust framework for trade between member countries This legal clarity not only facilitates smoother transactions but also enhances Vietnam's competitive edge in coffee exports to China, aligning with quality and technical standards essential for success in the comprehensive strategic partnership.
Goods exported from Vietnam to China can benefit from tariff preferences under the RCEP Agreement if they possess a Certificate of Origin (C/O) issued in accordance with the relevant regulations To maximize these benefits, Vietnam has established specific regulations regarding preferential tariff schedules The rules of origin outlined in Chapter 3 of the RCEP Agreement have been incorporated into Circular 05/2022/TT-BCT These C/O regulations are designed to enhance the export of Vietnamese products to China and other member countries, particularly those goods that have competitive advantages.
Vietnam and China’s business associations play a crucial role in facilitating information sharing and supporting business initiatives, addressing challenges in the implementation of certificates of origin and ensuring compliance with related requirements.
2.3.1.4 The RCEP Agreement is in line with China's foreign policy and Vietnam's international economic integration in the coming time
The RCEP Agreement aligns with China's strategy to enhance economic cooperation with ASEAN nations, positioning Vietnam as a key partner in both economic and political realms Strengthening ties with Vietnam will enable deeper access to the ASEAN market For Vietnam, the RCEP signing aims to bolster trade relations with China, New Zealand, Australia, Korea, and Japan, supporting its economic integration policy with significant global partners This agreement not only promotes the export of Vietnamese goods, particularly coffee, to China but also fosters foreign investment among member countries, facilitating the establishment of production and supply facilities and reducing trade transaction costs.
The agreement fosters consensus on the Party and State's policy for international economic integration, particularly with key partners who are signatories of the same agreement These longstanding partnerships strengthen Vietnam's position in deeper international integration, aligning with the multilateralization policy and contributing to the country's political stability, foreign relations, and national security in the future.
Vietnam and China exhibit distinct economic structures and varying levels of development Vietnam aims to enhance its growth model and integrate into the global economy through an export-driven strategy However, the country's coffee exports remain primarily in the low value-added segment, focusing mainly on raw materials Despite the favorable liberalization terms in trade agreements that facilitate low-tariff access for Vietnamese coffee to the Chinese market, challenges persist.
42 are still other taxes that can be imposed on goods Example: value-added tax consumption tax, anti-dumping tax, self-defense tax and anti-subsidy tax
The challenges from risks related to the global supply chain in the post-Covid-
Overview about Vietnamese Coffee Enterprises
In the first five months of the coffee crop year from October 2023 to September 2024, Trung Nguyen is the only domestic company among the top 10 exporters of roasted and instant coffee, as reported by the Vietnam Coffee - Cocoa Association Leading the list is NESTLÉ Vietnam from Switzerland, with an impressive turnover of approximately 57.5 million USD.
Table 2: Top 10 coffee exporting enterprises in 2022-2023
1 Café Outspan Vietnam Company Limited
2 Ngon Coffee Viet Nam Company Limited
3 NESTLÉ Viet Nam Company Limited
BRANCH OF TRUNG NGUYEN GROUP
5 TATA Coffee Viet Nam Company Limited
6 URC Viet Nam Company Limited
7 TOP CHOICE FOODS INTERNATIONAL JOINT
8 INSTANTA Coffee Viet Nam Company Limited
9 TATA IGUCU Viet Nam Company Limited
10 SUCAFINA Viet Nam Company Limited
Source: General Department of Viet Nam Customs
SWOT is analyzed about Vietnamese coffee Enterprises as below:
Vietnamese coffee Enterprises had modern production system, production equipment which meet the international standards such as: Trung Nguyen, Intimex,
Bien Hoa annual production capacity up to 50,000 tons per year, Central
Nguyen 60,000 tons per year, Intimex is operating 100% capacity with 4,000 tons of dried coffee per year and up to
- Product Diversification: Produced and supplied various coffee products, including roasted coffee, instant
- Product structure: Rate of processed coffee exported from Vietnam is still very low, Vietnamese enterprises mainly export raw materials to foreign partners
Investing in a coffee processing system with an annual capacity of 3,000 tons requires approximately $30 million (around 600 billion VND) However, many Vietnamese coffee enterprises struggle with limited capital Notably, Vinacafé Bien Hoa faces a high loan debt ratio, which presents potential financial risks; despite reaching nearly 2,100 billion VND in revenue in 2023, the company's profit remains a concern.
Network : Vietnamese coffee has been exported to many countries around the world (US, Japan,
China, ) , currently ranked 2nd not only in the world but also into China
- Quality of Coffee - Raw Materials:
Vietnam has a climate and soil suitable for the growth of coffee plants, especially Robusta coffee type
- High competitive price: Robusta coffee is cheaper than Arabica coffee
(1,5% caffeine) so Viet Nam has a competitive advantage in price In particular, amid the economic downturn, consumers tend to switch from Arabica coffee to robusta to minimize costs
- Variable Coffee Prices: Coffee prices are often vary with weather and other factors
The coffee harvesting process often involves mixing green and ripe branches, resulting in low-quality processed coffee Additionally, the lack of a robust infrastructure for manufacturing, export processing, and stockpiling post-harvest contributes to the overall challenges in the coffee industry.
The Vietnamese government currently lacks a flexible management policy and does not invest in product processing, primarily focusing state capital support on the export of coffee products.
The market is experiencing significant growth, both domestically and internationally Following the COVID-19 pandemic, China's economic reopening has played a crucial role in fostering global development Consequently, the global economy has seen an increase from 2.7%.
2,9%, and major economies such as the United States, EU also had a
- Climate and Weather Change: This one affects to coffee production, quality and supply that make risks to production and volatile prices
- Fierce competition: Competition from domestic and foreign big competitors (Highland, Starbucks, )
- Consumer‟s preferences or lifestyle changes: so it‟s requiring coffee
50 flourish From the beginning of 2023,
Brazil and Indonesia are showing signs of shrinking supply According to the Brazilian Institute of
Geography and Statistics, Brazil‟s robusta coffee production in 2023 decreased by nearly 9% compared to last year; Indonesian coffee production also fell to its lowest level in around a nearly decade
- Organic and sustainable coffee trends:
Organic and sustainable coffee are becoming an important trend,
Vietnamese coffee enterprises can take this advantageto create products for attracting their market
Viet Nam has been joining into WTO,
FTAs has opened opportunities for
Vietnamese enterprises have the opportunity to collaborate with international partners and major corporations, allowing them to expand their global distribution networks This collaboration can enhance their export capabilities, strengthen brand recognition, and develop more robust franchise systems.
Coffee, the coffee brand of Trung
Nguyen Coffee is poised for rapid growth, presenting valuable lessons and opportunities for Trung Nguyên businesses to continually innovate their products and services to align with evolving market demands For instance, the shift towards remote work is influencing consumers' coffee drinking habits, necessitating adaptations in offerings.
- Coffee production technology: The moderm coffee production technology can help coffee businesses improve production efficiency and product quality to maintain competitiveness than simple one
The rise of electronic commerce technology presents significant opportunities for coffee businesses in Vietnam, enabling enterprises to utilize e-commerce platforms to broaden their market reach and attract new customers.
As coffee demand surges in China and other countries, the expectations for quality also rise Major consumption markets impose strict regulations on pesticide residues in coffee plants, compelling businesses to adapt their production methods to comply with export standards.
- Coffee Raw Materials: The Vietnamese coffee production areas have not developed in a sustainable
Vietnamese coffee enterprises are exploring opportunities to expand their store presence and enter new markets, primarily by increasing planting areas rather than emphasizing production and processing However, major importing countries have implemented bans on coffee imports associated with deforestation, which may impact these expansion efforts.
In conclusion, Chapter 2 highlights the significant potential of the coffee consumer market in China, presenting a substantial opportunity for Vietnamese coffee enterprises to export their products While these enterprises benefit from access to quality raw coffee and low labor costs, they face challenges such as technological limitations, quality control issues, and competition from well-established foreign brands Additionally, the Chinese market increasingly demands higher quality due to evolving government policies and consumer preferences To address these challenges and capitalize on opportunities, the author proposes strategies and solutions for enhancing the export of Vietnamese coffee to China in Chapter 3.