By: Murray Hiebert

As Vietnam and the US mark the 40th anniversary of the end of their bitter war on April 30, it’s surprising how far the two countries have come in normalizing relations. To be sure, there are still areas where ties could be deepened, particularly in military-to-military interaction. 

The US is held back by concerns about human rights, particularly Hanoi’s detention of bloggers, but for Vietnam the worry centers on how giant neighbor China will react.  Vietnam this year seems to have two major priorities in its ties with the US: Host President Barack Obama in Hanoi and secure a meeting for Communist Party chief Nguyen Phu Trong in the White House. 

When Washington signaled that Trong would be invited to visit Washington, China sought to preempt the Americans by sending him a last-minute invitation to visit Beijing.  While Beijing feted the Vietnamese party chief in early April, Vietnam welcomed US naval ships for an annual exercise off the coastal city of Danang, as if to signal its intention to balance ties between China and the US.

A key factor driving Vietnam to bolster its relations with the US in recent years has been China’s increasingly assertive behavior in the disputed South China Sea. Most recently, China has been changing facts on the water by dredging sand and pumping it onto partially submerged coral reefs, transforming them into new manmade islands in the Spratly Islands, parts of which are also claimed by Vietnam, the Philippines and Malaysia. China appears to be creating outposts from which it can conduct air and sea patrols 1,000 miles off its southern shore.

Vietnam’s concerns about China’s actions in the South China Sea date back to 2009 when Chinese ships began harassing the oil and gas exploration activities of PetroVietnam and its foreign partners off the coast of Vietnam. Anti-China protests, some violent, erupted in Vietnam in May 2014 after China parked a deep-water oil rig owned by China National Offshore Oil Corp. in disputed waters off the coast of central Vietnam.

Since the US and Vietnam restored diplomatic ties in 1995, their relations have deepened in almost every area from economic to military relations and political to cultural cooperation. When Vietnamese president Truong Tan San visited Washington in July 2013, he and Obama announced an agreement to launch a comprehensive partnership, signaling a decision by both governments to boost strategic ties.

Bilateral economic relations have flourished since 1994 when the US lifted the embargo against Vietnam. Two-way trade reached US$36.3 billion in 2014, up more than tenfold since the two countries signed a bilateral trade agreement 13 years ago. Vietnam estimates that US companies have invested US$11 billion, making the US the country’s seventh largest investor.  The biggest US investor is Intel Corp., which built a US$1 billion wafer testing plant in Ho Chi Minh City.

Despite Vietnam’s growing trade ties with the rest of the world, China remains the country’s top trading partner with two-way trade expected to reach US$60 billion this year, almost twice that with the US. But Vietnam’s economic dependence runs even deeper. The country relies on China for much of its electricity in the northern part of the country, and many of the inputs for its critical exports of garments to the US and Europe come from China.  

To hedge its economic bets, Hanoi is partnering with the US, Japan and nine other countries in the Trans-Pacific Partnership, the trade agreement known as TPP, which negotiators seek to complete in the coming months. Vietnam hopes not only that the TPP will help force reforms of its inefficient state-owned enterprises, but also will give its economy alternative markets and decrease its heavy reliance on China.