As the Lunar New Year approaches, numerous businesses are busy coordinating with Vietnamese factories to arrange post-holiday production schedules and make phased payments. However, the persistent depreciation of the Vietnamese dong (VND), coupled with impending foreign exchange regulations, is introducing new variables into Vietnam's trade relations.
The exchange rate between the Chinese yuan and Vietnamese dong continues to climb, with the official rate reaching approximately 1:3700, while unofficial channels have surpassed 1:3900 and approach the 1:4000 threshold. Since last year, frequent exchange rate fluctuations have drawn significant market attention, with industry experts widely anticipating that Vietnam's government may implement stricter foreign exchange controls.
Strict New Forex Regulations Take Effect
On February 9, Vietnam's new foreign exchange management rules will officially take effect, specifically targeting illegal currency exchange activities through underground banks and gold shops. Under the new regulations, individuals engaged in unauthorized foreign currency exchange face substantial fines ranging from 10 million to 100 million VND, along with confiscation of all involved foreign currency. Businesses participating in illegal exchange operations, including shops and counters, could face maximum penalties of 250 million VND.
Notably, exchange rates displayed at airports and hotels typically run 5%-8% below market prices, effectively increasing conversion costs for travelers and businesses alike.
Tougher Cash Declaration Requirements
Vietnam has simultaneously upgraded requirements for cash declarations at border crossings. The new rules explicitly mandate declarations for carrying cash exceeding the following thresholds: foreign currency (such as USD) above $5,000, or Vietnamese dong exceeding 15 million VND. Any undeclared amounts above these limits will face penalties. Previous methods to circumvent declarations, such as "distributed carrying" across multiple containers, will no longer be viable under the strengthened regulations.
Impact on Trade Relations
These developments carry several implications for trade between China and Vietnam. First, for businesses needing to make payments to Vietnamese suppliers, the dong's depreciation means more yuan is required for the same transaction value, effectively increasing procurement costs. Second, the new forex regulations substantially raise the risks associated with unofficial exchange channels, compelling companies to exercise greater caution in selecting compliant currency conversion methods. Additionally, enhanced cash declaration requirements elevate compliance costs for business travel between the two nations.
Preparing for Policy Changes
In response to Vietnam's foreign exchange policy adjustments, businesses should implement preparatory measures. Companies should closely monitor exchange rate trends and strategically schedule payments to minimize losses from currency fluctuations. Utilizing authorized banks or financial institutions for currency exchange ensures both security and regulatory compliance. Organizations must also thoroughly study Vietnam's new forex management rules to avoid penalties from inadvertent violations. Before the regulations take effect, firms should reassess their Vietnam trade strategies to ensure uninterrupted operations.