Vietnam’s International Financial Center Takes Shape After One Month

Vietnam's ruling Communist Party has concluded its 14th five-yearly congress, a pivotal event that selects the nation's top leader and charts its strategic course through 2030. The outcomes will shape the political and economic trajectory of one of Asia's most dynamic economies.

Inside the Leadership Selection Process

The party's leadership structure is determined through a multi-layered process. Roughly 1,600 delegates, who represent over 5 million party members, are tasked with appointing about 200 officials to the Central Committee. This body then selects the 17 to 19 members of the Politburo, the party's highest decision-making authority. From this elite group, the general secretary is chosen.

Current party chief To Lam, 68, received a preliminary endorsement from the party in December to continue in his role. However, the final decision was made by the newly elected delegates at the congress. In his brief tenure, Lam has been known for implementing sweeping reforms, tightening national security, and expanding the influence of the police ministry, an institution he led for nearly a decade.

Figure 1: Party chief To Lam, 68, is positioned to extend his leadership after implementing significant reforms and tightening state security.

Following the congress, the Politburo will nominate candidates for president, prime minister, and speaker of the parliament. These appointments must then be confirmed by lawmakers. While parliamentary elections are scheduled for March with a first meeting in April, an extraordinary session could be convened earlier to formalize these key government positions. The role of the party chief has grown increasingly powerful in recent years, making it the most influential post in the country.

Policy Stability: "Bamboo Diplomacy" and Economic Strategy

Vietnam’s leadership operates on a principle of collective decision-making, which has ensured remarkable stability in both economic and foreign policy since the landmark Doi Moi reforms of the late 1980s. These reforms were instrumental in transforming the nation from a war-torn state into a fast-growing economic powerhouse.

On the world stage, Vietnam has long pursued a strategy of "Bamboo Diplomacy," carefully balancing its relationships with major global powers, including China, the United States, and Russia. Although Lam has moved away from using the specific phrase, the underlying pragmatic approach is expected to continue unless major geopolitical shifts occur.

Economically, Lam has shown a preference for cultivating private enterprise through the development of "national champions" that operate under state guidance. While Vietnam aims to reduce its dependence on the foreign investment that fuels its export-driven economy, it remains focused on attracting advanced technology and capital to achieve its ambitious goal of becoming a high-income country by 2045.

An Ambitious Economic Blueprint for 2030

Economic growth remains the cornerstone of the Communist Party's legitimacy. In a speech to the congress, To Lam pledged to achieve annual economic growth of more than 10% for the remainder of the decade. This target is notably ambitious, especially when compared to the 6.5% to 7% goal for the 2021-2025 period, which was missed.

This bold vision comes as Vietnam navigates a complex global trade environment, including high U.S. tariffs on its goods that could impact revenue from its largest foreign market. To counter these challenges, the party is advancing a new growth model. According to a draft report, this model positions the private economy as the "driving force" while the state maintains a "leading role."

To support this strategy, the government plans to increase public spending on infrastructure and development projects. This will result in a projected budget deficit of approximately 5% of GDP over the next five years, a significant increase from the 3.1% to 3.2% recorded between 2021 and 2025.

A Legacy of Unchallenged Rule

The Communist Party of Vietnam, founded by Ho Chi Minh in 1930, has a long history of governance. It assumed control of northern Vietnam in 1954 following the end of French colonial rule. After the conclusion of the war with the United States and the fall of Saigon in 1975, Vietnam was reunified under the party.

Since then, it has ruled the country unchallenged, permitting no political opposition. This long-standing political structure provides the backdrop for the country's current leadership decisions and long-term strategic planning.

Fiscal drag: the hidden tax mechanism

Source: BI

The yen stayed under pressure after the Bank of Japan held rates steady on Friday, as expected, while the U.S. dollar headed for its steepest weekly drop since June as geopolitical tensions and abrupt policy shifts around Greenland unsettled investors.

The yen was slightly weaker at 158.54 following the BOJ's rate decision and after it raised its economic and inflation forecasts, highlighting the central bank's readiness to continue hiking still-low borrowing costs.

Last month, the BOJ raised its policy interest rate to a 30-year high but that has not helped the frail yen. Traders are concerned that a break beyond 160 per dollar could prompt Tokyo to step into the currency market to support the yen.

Moh Siong Sim, FX strategist at OCBC, said the market was hoping the yen's weakness might trigger a more forceful BOJ response but the central bank maintained the same rhetoric - an outcome that was pretty neutral for markets.

"After all, yen indirectly fits into the economic projections if the weakness is sustained," he said.

The spotlight will now be on comments from Governor Kazuo Ueda to gauge when the next hike will come and whether there is any hawkish tilt to support the yen. Ueda will hold a news conference to explain the decision at 0630 GMT.

"Governor Ueda in his remarks will likely lean into a more hawkish direction, which may keep the next meetings 'live' for a further policy rate hike," said Fred Neumann, chief Asia economist at HSBC.

"The Board appears to be leaning more hawkish as well, with one dissenter at today's meeting indicating that further policy rate hikes are on the table."

The yen has been under relentless pressure since Sanae Takaichi took over as Japan's prime minister in October, dropping more than 4% on fiscal concerns and hovering near levels that have spurred verbal warnings and intervention fears.

A bond market rout this week underscored investor nerves about Japan's fiscal position as Takaichi called a snap election for February and promised tax cuts, sending Japanese government bond yields to record highs. They have recovered somewhat since then but investors remain skittish.

Carol Lye, portfolio manager at Brandywine Global, said the authorities have to come up with a more concrete plan to calm the markets. "If there's no action, then it's just words. It's not going to anchor the market down."

"And until they do, I think there's still room for the JGBs across the entire curve to continue being volatile. The rate hikes are also not coming in quickly enough."

DOLLAR SELLING MOMENTUM

The shifting geopolitical landscape has weighed on sentiment this week as Trump said he had secured U.S. access to Greenland in a deal with NATO that came as he backed off tariff threats against Europe and ruled out taking the autonomous territory of Denmark by force.

The dollar has borne the brunt of investor angst in the currency markets as U.S. assets were pummelled at the start of the week amid the intensifying geopolitical tensions.

The dollar index , which measures the U.S. currency against six units, was at 98.366 after dropping 0.58% in the previous session, on course for a 1% slide, its worst weekly performance since June 2025.

The euro was steady at $1.1746, hovering near the three-week high it touched earlier this week, while sterling fetched $1.3496, near a two-week high hit in the previous session.

The Australian dollar was steady at $0.6841, while the New Zealand dollar was 0.3% weaker at $0.59105.

Thierry Wizman, global FX & rates strategist at Macquarie Group, said while a Greenland deal solves the immediate problem of tariffs and invasion, it doesn't solve the core issue of the seeming alienation of allies from one another.

"And that's not a good place to be if you want to preserve the USD's reserve-currency status."

Source: Reuters

Washington's control over Venezuelan oil exports has sparked a new showdown with China, directly threatening the oil-for-debt deals that Beijing had relied on for repayment. This move further complicates Venezuela's path out of default and sets the stage for a financial clash between the two global superpowers.

China's Stake in Venezuelan Oil

Venezuela is saddled with a foreign debt of approximately $150 billion, and a significant portion of that—an estimated 10%—is owed to China. Until recently, the OPEC nation was servicing these loans by shipping oil directly to China.

This arrangement, however, was upended when the U.S. moved to control revenue from Venezuelan President Nicolas Maduro's government. According to debt experts, the dispute over these oil cargoes could make it much harder for Venezuela to restructure its debt following its 2017 default. It also jeopardizes Beijing's future cooperation in debt restructuring for other developing nations.

"Even under the best circumstances, this was going to be very messy—trying to disentangle where all these creditors stand in the credit hierarchy," said Christopher Hodge, chief economist with Natixis and a former U.S. Treasury official. He noted that while Washington only controls oil sale proceeds, this represents Venezuela's main source of revenue.

"The fact that now America is controlling all the finances into and out of the country... this seems to be unprecedented to me," Hodge added.

The Oil-for-Debt Mechanics

Documents from the state-run oil company PDVSA confirm that for the last five years, three supertankers have been transporting oil between Venezuela and China to cover interest payments under a 2019 deal. These shipments represent only a part of Venezuela's total crude exports to China.

Research from AidData, a lab at the U.S. university William & Mary, shows that cash proceeds from some oil sales to China were deposited into an account controlled by Beijing to service the debt. This allowed China to receive payments even as sanctions and Venezuela's default blocked other creditors.

US Intervention Changes the Game

The Trump administration declared that proceeds from Venezuelan oil sales will now be funneled into a Qatar-based account controlled by Washington. This move gives the U.S. president substantial leverage to decide which creditors get paid and when.

In response, China’s foreign ministry stated that Beijing "has repeatedly stated its position." During a January 7 news conference, Beijing condemned the redirection of the oil exports, insisting that the "legitimate rights and interests of China and other countries in Venezuela must be protected."

A White House spokeswoman, Taylor Rogers, told Reuters that Trump had brokered an oil deal that "will benefit the American and Venezuelan people." A U.S. official later clarified that the administration is allowing China to buy Venezuelan oil, but not at the "unfair, undercut" prices previously offered. Instead, these are now considered private market transactions, not debt payments.

"The people of Venezuela will collect a fair price for their oil from China and other nations," the official said. The Venezuelan communications ministry did not respond to a request for comment.

A Disrupted Creditor Hierarchy

Restructuring advisors warn that the U.S. takeover of Venezuela's oil revenue could upend the established order of creditors. Some $60 billion of Venezuela's bonds went into default in 2017, and a restructuring agreement is critical for the country to borrow again and attract investment.

"All of these things will have the practical effect of subordinating the claims of legacy debtholders," said global sovereign debt expert Lee Buchheit, who questioned whether Trump had the legal authority to determine who gets paid first.

Typically, bilateral lenders negotiate losses together through forums like the Paris Club of creditor nations. This sets a standard for the losses private lenders must also accept.

"Comparability of treatment will be a real challenge, particularly if the U.S. controls the use of oil revenues," noted Mark Walker, a sovereign debt advisor who has worked on potential Venezuelan restructurings.

Broader Risks for Global Debt Deals

If the U.S. pressures China to accept major writedowns on its Venezuelan debt and Beijing refuses, the stalemate could drag out a restructuring and cripple Venezuela's economic recovery.

Jean-Charles Sambor, head of emerging market debt at TT International, which holds Venezuelan bonds, warned this could keep Venezuela "in very dire straits during the foreseeable future." A prolonged crisis would, in turn, limit the amount the country can ultimately repay to any of its creditors.

While China has little immediate leverage—countries rarely take legal action against each other over sovereign loans—it holds a powerful long-term card. Beijing is the world's largest bilateral lender to developing nations, and its cooperation through platforms like the Common Framework has been crucial in recent debt talks for countries like Ghana, Zambia, and Ethiopia.

"China's obvious leverage is to refuse to cooperate in future Common Framework sovereign debt workouts until it feels that it has been treated fairly in Venezuela," Buchheit concluded. "And that threat would have some force."

Growth accelerates, powered by consumption

A peace body with an unusually broad mandate

Source: AFP