Political relations have been buttressed by the regular exchange of high-level delegations, while economic ties have burgeoned. The value of two-way trade has risen from almost nothing in 1991 to $15 billion in 2007, making China Vietnam’s largest overall trade partner (Xinhua News Agency, January 23). For Vietnam though, this has been a mixed blessing: As cheap Chinese-manufactured goods have flooded the Vietnamese market, its trade deficit with the PRC has ballooned, reaching $2.87 billion by 2005; expanded cross-border trade has also led to an increase in counterfeit goods, smuggling, and illegal trafficking in people and narcotics; and the Vietnamese are continually disappointed at the low level of Chinese investment.
Since 1991 bilateral relations have been dominated by three sets of territorial issues: Demarcation of the 850-mile land boundary, delineation of the Gulf of Tonkin, and overlapping sovereignty claims in the South China Sea, particularly the Paracel and Spratly Islands. It is important to stress, however, that early on in the post-normalization phase of the relationship the Vietnamese and Chinese governments determined not to let such problems fetter the development of bilateral ties, and to that end agreed to norms of behavior and put in place a framework of negotiations to manage and eventually resolve their disputes. Despite frequent flare-ups, mutual suspicions and distrust, and political grandstanding, substantial progress was achieved and, most importantly, conflict between their armed forces has been avoided.