The Constitution stipulates the monetary unit of the nation is the VND and the Ordinance specializes that the VND is used as a means of payment within Vietnam’s territory. However, the Ordinance also allows the use of foreign currencies in certain transactions, Hung said in a Q&A session held by the National Assembly on November 1. 

According to Hung, article No.26 of the Ordinace specifies the use of currency of the country having the common frontier with Vietnam, which is in line with international commitments that Vietnam is a part of. 

Currently, Vietnam has signed trade border agreements with China, Laos and Cambodia, not to mention the Law on Foreign Trade Management. Based on these regulations, Circular No.19 fully complies with Vietnamese legislation, Hung asserted. 

Starting on October 12, Vietnam has accepted payment in the VND, CNY, or fully convertible currencies for overland trade activities with China. The decision is part of the SBV’s Circular No.19 released on August 28, providing guidance on foreign currency management in cross-border trade between Vietnam and China. 

The circular applies to commercial banks and branches of foreign banks licensed to conduct foreign exchange transactions in Vietnam; branches of branches of banks located in border areas and border-gate economic zones of Vietnam and China; organizations trading in duty-free goods; organizations providing services in isolated areas at international border gates; organizations engaged in bonded warehouses in border regions; the Vietnam-China Border Gate Economic Zone; and other organizations and individuals conducting payment activities in Vietnam-China border trade.

During the 2013 – 2018 period, Vietnam’s export turnover through border gates exceeded US$100 billion with China, accounting for an average of 29.06% of total bilateral trade turnover, informed the Ministry of Finance (MoF) in a report on Vietnam’s cross-border trade activities with China, Laos and Cambodia. 

Vietnam imported US$250 billion worth of goods from China in the period, over 200% higher than the export turnover. 

This resulted in Vietnam’s trade deficit of US$150 billion with China through border gates, not to mention billions of USD generated from unofficial and illegal trade activities, stated the report.