Balancing Without Allying: Vietnam’s Middle-Power Strategy Amids U.S. - China Rivalry

Statements and views expressed in this commentary are solely those of the authors and do not imply endorsement by Harvard University, the Harvard Kennedy School, or the Belfer Center for Science and International Affairs.

Key Judgments

• Vietnam’s evolution as a middle power is driven by a unique fusion of domestic imperatives and external
  pressures. Facing structural vulnerabilities at home and intensifying U.S.-China competition abroad,
  Vietnam has adopted a strategy centered on geopolitical autonomy and deep international integration.
  Though constrained, Vietnam subtly shapes regional dynamics by refusing binary alignments, building
  multialigned partnerships, and anchoring itself in multilateral norms. Through an examination of its political
  economy, external relations, and four strategic domains — geopolitics, trade, technology, and energy
  — this analysis shows how Vietnam pursues development goals while cautiously leveraging its position
  in the global balance of power.
• Half a century after its reunification and nearly four decades since launching its “Doi Moi” reform, a
  series of open-door policies, Vietnam stands at a critical juncture. Despite impressive economic achievements,
  the country’s domestic growth engines —investment and consumption — are losing momentum.
  As a result, Vietnam must rely heavily on foreign direct investment (FDI) and international trade, raising
  concerns about its ability to sustain high growth and avoid the looming “middle-income trap.” This prospect
  threatens the legitimacy of the Vietnamese Communist Party (VCP), which has long tied its authority
  to economic performance and aspires to achieve advanced economy status by 2045. Complicating this
  ambition is the VCP’s ongoing effort to build a globalized market economy while preserving socialist ideology
  as both legacy and political instrument.
• Growing great-power competition — most notably between the United States and China — is exacerbating
  these internal challenges, making it harder for states to remain neutral.¹ Vietnam, with its historically
  complex relationships with both powers, must strike a delicate balance to avoid entanglement.
  This paper addresses the central question of how Vietnam can pursue its long-term development goals
  while maintaining a socialist orientation in an increasingly polarized geopolitical environment, analyzing
  Vietnam’s foreign policy and domestic political economy, with a particular focus on its evolving identity
  as a “middle power” and its strategic priorities.²
• Vietnam’s domestic political and economic foundations shape its international behavior. As a one-party
  state, it has built a socialist-oriented market economy that is deeply integrated into the global system.
  Over the past three decades, the VCP has gradually shifted its focus from ideological purity to performance-
  based legitimacy.³ Peace and political stability are viewed as essential to development, while
  the leadership sees endemic corruption and entrenched patronage networks as existential threats. The
  resulting “blazing furnace” anti-corruption campaign has driven major leadership reshuffles without
  altering core strategic directions.
• Economically, Vietnam has been widely recognized for sustained growth, poverty reduction, and structural
  transformation. Public investment, exports, and FDI have served as the main engines of the economy.
  Yet serious structural weaknesses persist: a weak domestic private sector, an overreliance on FDI
  for exports, and inefficient state-owned enterprises. These vulnerabilities jeopardize the country’s longterm
  ambition of escaping the middle-income trap.
• Vietnam’s international posture has evolved through careful learning from its Cold War experience and
  pursuit of three core principles: political autonomy, deep international integration, and expanded global
  influence. Political independence remains a top priority. To avoid choosing sides in great-power rivalries,
  Hanoi practices what it calls “bamboo diplomacy” — firm on core interests and principles, but flexible in
  strategies and tactics.
  Vietnam’s strategy of self-protection through integration has led to a web of interdependent relationships
  across ideological lines. It maintains friendly ties with all major powers as well as countries like
  Iran, Cuba, and North Korea. It is a member of nearly all major multilateral institutions — from the UN
  and WTO to ASEAN, APEC, CPTPP, RCEP, and IPEF — and has signed over 20 free trade agreements.
  Vietnam’s high level of FDI penetration and proactive integration into global supply chains reflect this
  outward-facing strategy.
• Since the 1990s, Vietnam has steadily increased its influence, maintaining diplomatic relations with
  193 countries and taking on active roles in multilateral bodies such as the UN Security Council, UN
  Peacekeeping, and the UN Human Rights Council. Notably, Hanoi has expanded its network of high-level
  diplomatic partnerships, including comprehensive strategic partnerships with China, the United States,
  Russia, Japan, India, Australia, Korea, France, New Zealand, the U.K., and four ASEAN states, along with
  strategic or green partnerships with South Africa, Germany, Brazil, and Denmark, among others.
• Today, the most salient areas in Vietnam’s foreign policy lie at the intersection of geopolitics, economic
  modernization, technological upgrading, and climate adaptation. Key challenges include navigating
  mounting U.S.-China tensions, building a resilient economic model for the 2045 target, driving future
  growth through digital transformation and the semiconductor sector, and ensuring a sustainable energy
  transition that aligns with climate goals.

Vietnam’s Role and Importance as a Middle Power

For over 2,000 years, Vietnam’s history has been marked by the involvement of great powers, predominantly
China. Before 1945, Vietnam fought for independence against foreign invaders — first China and then France
— in a long nationalistic struggle that lacked a clear ideological system. Starting in 1950,⁴ Hanoi aligned with
the communist bloc, a position it maintained throughout the North-South national division in the Vietnam
War until the end of the Cold War. During this period, there was a clear distinction between comrades and
enemies, though front lines sometimes shifted due to great-power calculations. For instance, from 1950
to 1975, North Vietnam allied with the Soviet Union and the People’s Republic of China in the war against
France, and later against the United States and South Vietnam. However, after the U.S.-China rapprochement
to counter the Soviet Union and China’s shifting strategy toward Vietnam in the mid-1970s — particularly
after Vietnam’s reunification in 1975 — Hanoi decided to side with Moscow against Washington and Beijing.

Subsequently, Vietnam suffered from the Western and Chinese economic embargo and political isolation
following its intervention in Cambodia to overthrow the genocidal Pol Pot regime and hence its border war
with China, both in 1979. By the mid-1980s, the country plunged into a severe economic crisis that challenged
the survival of the Vietnamese Communist Party (VCP). The situation worsened in 1988 when Vietnam lost
several islets to China after a brief military clash in the Spratly Islands. Despite a 1978 mutual defense pact
with the Soviet Union and the presence of a Soviet naval base in the Cam Ranh Bay, not far from the disputed
islets, Vietnam received no assistance from its communist ally during the conflict.

Following these painful lessons and the collapse of the communist bloc in the early 1990s, Vietnamese leadership
made a historic decision to shift its strategic direction from one based on ideology to one centered
on international integration, regardless of a partner’s political regime. As a result, Vietnam sought to avoid
taking sides in international conflicts, develop relations with as many states and partners as possible, and
join multinational institutions, thereby preventing isolation while leveraging collective power.

Thanks to this pivotal shift, Vietnam is now ranked 12th out of 27 nations in the Asia Pacific in terms of comprehensive
power, including diplomacy, economy, defense, culture, resilience and resources, with the second
greatest gains in 2025, according the Lowy Institute Asia Power Index.⁵ It is estimated to overcome Thailand
and rise to the 11th position in 2026.⁶ Globally, Vietnam rose to 30th out of 89 nations on U.S. News & World
Report’s “Most Powerful Countries” and 24th out of 190 nations as per CEOWORLD Magazine’s “World’s
Most Powerful Countries.” It was also ranked 23rd out of 145 nations in military strength by Global Firepower.⁷
Economically, Vietnam is one of the fastest growing economies in Asia, with its gross domestic product
reaching $484 billion in U.S. dollars in 2025, making it the 34th largest economy in the world according to
the International Monetary Fund.⁸

Vietnam’s Relationships with Other Middle Powers

Due to its domestic conditions and complex history with the United States and China, Vietnam has little
leeway to maneuver on its geopolitical tightrope. Logically, an effective pathway for the country is to engage
bilaterally and multilaterally with other states, particularly those in the same middle ground, to create a synergy
of collective power, as implied by Hanoi’s bamboo diplomacy.

Bilaterally, Vietnam strengthens its ties with other large or middle powers by upgrading its diplomatic
relations. For instance, it has established comprehensive strategic partnerships (CSPs) with India, Japan,
Australia, New Zealand, Malaysia, Indonesia, Singapore, Thailand, and the U.K.; strategic partnerships with
Brazil, South Africa, Finland, the Czech Republic, Bulgaria, Kazakhstan, Azerbaijan, Kuwait, and Algeria; and
comprehensive partnerships with Switzerland and Egypt.⁹ Additionally, it maintains strategic or friendship
relations with other middle states, including the United Arab Emirates (UAE), Saudi Arabia, and Turkey.

Among these partners, India, Singapore, and Australia have emerged as strong allies in many areas. Since
the 1950s, India and Vietnam have nurtured a long-standing friendship rooted in bilateral strategic trust, as
demonstrated by the two countries’ comprehensive ties in diplomacy, trade, education, and defense. Since
upgrading the partnership to a CSP in 2016, Vietnam has deepened its relations with India across several
areas vital to its maritime capabilities, particularly in the South China Sea. This cooperation includes military
hardware, specialized training, and technical assistance from India to Vietnam.¹⁰ In the energy sector,
Vietnam benefits significantly from the continued presence of ONGC Videsh, India’s flagship overseas oil
firm, within its South China Sea Exclusive Economic Zone (EEZ).¹¹ Diplomatically, the two countries share a
fundamental stance on international law, particularly the UN Convention on the Law of the Sea (UNCLOS)
enhancing Vietnam’s legal position against China’s defiance of UNCLOS in the South China Sea. 

More broadly, India and Vietnam have intensified defense cooperation alongside other ASEAN nations sharing
their South China Sea interests in upholding UNCLOS, protecting littoral states’ fishery and energy industry
and countering Chinese assertiveness, such as the Philippines, Indonesia, Singapore, and Malaysia. This
collaboration includes missile purchases, joint exercises, naval port calls, and military training.¹² Notably, the
inaugural ASEAN-India Maritime Exercise in 2023, held in the South China Sea, signaled a collective effort by
ASEAN nations in alignment with India to counter Chinese maritime pressure.¹³ For India, these burgeoning
collaborations not only advance its Act East and Security and Growth for All in the Region (SAGAR) policies
but also complicate Beijing’s strategic calculations in maritime disputes, implicitly aligning the country with
Vietnam and other South China Sea disputants in challenging China’s regional dominance.

Given its smaller size relative to India, Singapore is the Asian nation that Vietnam looks up to as an inspiring,
relevant, and applicable model of development. With its miraculous transformation “From Third World
to First” over three decades, as detailed in Lee Kuan Yew’s memoir of the same name, Singapore is now the only Southeast Asian country that has escaped the middle-income trap, offering many lessons for Vietnam. Markedly, both countries have no territorial conflicts and share significant similarities: de facto one-party rule, multidirectional foreign policy without treaty alliance with great powers, and a commitment to upholding international law. Additionally, both occupy regionally strategic locations, maintain an openness to trade and FDI, and share common culture values. For decades, Vietnam and Singapore have fostered their strategic partnership across diplomacy, trade, investment, education, and technology.¹⁴

In March 2025, the two nations elevated their relations to CSP, with new focal areas of cooperation including
the green economy, renewable energy, digital domains, and emerging technologies. Today, they embrace
ongoing and new initiatives such as the Green-Digital Economic Partnership and export of offshore wind
energy from Vietnam to Singapore.¹⁵ The latter partnership develops Vietnam’s abundant renewable energy
resources, such as offshore wind power, to integrate the country into the ASEAN Power Grid. This demonstrates
Vietnam’s vision of becoming a Southeast Asian renewable energy hub.¹⁶ Alongside energy, Vietnam
collaborates with Singapore and other regional nations on underwater data transmission. Aiming to become
a regional data hub, Vietnam has partnered with Singapore to develop the Vietnam-Singapore Cable System
(VTS), which directly connects Vietnam and Singapore and may be extended to Cambodia, Malaysia, and
Thailand once operational in 2027.¹⁷

Australia has emerged as a prominent regional player that extensively assists Vietnam in navigating greatpower
competition. Hanoi upgraded its relationship with Canberra to CSP in 2024, emphasizing cooperation
in climate change, energy, digital transformation, and defense. As a close U.S. ally, Australia helps facilitate
Vietnam’s interactions with key Western partners, particularly in sensitive domains such as intelligence
sharing and maritime security, ensuring these engagements are managed prudently to prevent any strain on
relations with China.¹⁸

Significantly, Australia is one of the few Western nations to have provided substantial assistance to strengthen
Vietnamese defense capabilities for more than a decade. Canberra has trained over 4,000 Vietnam People’s
Army officers and supported Hanoi’s international peacekeeping efforts by providing strategic airlift assistance
for deployments to the UN Mission in South Sudan. By 2023, Australia had provided air transport
for Vietnamese personnel, equipment, and rotating medical staff at a field hospital in South Sudan for five
consecutive years.¹⁹ The partnership also includes cooperation on Women, Peace, and Security initiatives.²⁰
Under the CSP, the two countries agreed to elevate this collaboration to a formal Peacekeeping Partnership
Arrangement, expanding Vietnam’s defense capabilities and its long-term role in international peacekeeping.²¹
Multilaterally, Vietnam also proactively engages with other middle states via multinational organizations and
ASEAN and ASEAN-led fora, such as BRICS, G20, Non-Aligned Movement (NAM), and Group of 77 (G77).
Vietnam has strategically anchored its multilateral endeavors in ASEAN, leveraging its membership to boost
regional stability and cooperation. Vietnam’s proactive chairmanships in 1998, 2010, and 2020, when it introduced
innovative online meeting protocols during the COVID-19 pandemic, highlight this strategic engagement,
setting a new standard for ASEAN’s operational collaboration. Moreover, the creation of the ASEAN
Defence Ministers’ Meeting Plus (ADMM-Plus) has significantly enhanced defense cooperation within ASEAN
and with major global powers, like the United States, China, and Russia.

Additionally, Vietnam’s diligent diplomacy in negotiating the Declaration on the Conduct of Parties in the
South China Sea (DOC) and the ongoing Code of Conduct in the South China Sea (COC) underscores its dedication
to a peaceful, rules-based resolution of disputes, reinforcing its role as a crucial mediator and architect within the ASEAN framework. Economically, Vietnam is deeply integrated into the regional economy, with ASEAN collectively serving as its second-largest trading partner after China. Its active engagement in the ASEAN Free Trade Area (AFTA) and key ASEAN-led free trade agreements — including those with China, South Korea, and Japan — has broadened Vietnam’s trade prospects and cemented its position within the regional economic landscape.²²

Beyond Southeast Asia, Vietnam has strategically engaged with BRICS nations to strengthen economic ties
and explore development opportunities, all while maintaining a balanced stance in global power dynamics. At
the 2024 BRICS summit, Vietnam expressed its willingness to collaborate with the bloc in the digital economy,
green development, and innovation but intentionally avoided full membership.²³ The next year, Vietnam
was formally recognized as a “partner country” and subsequently attended the 17th BRICS summit in July
2025.²⁴ This calculated approach enables Vietnam to explore potential benefits, like a proposed BRICS currency
to enhance economic resilience and reduce exposure to financial weaponization,²⁵ without straining its
critical relationship with the United States.²⁶

Through its growing partnership networks, Vietnam is dedicated to enhancing regional security and advocating
a rules-based order in Southeast Asia and beyond. By fostering deeper economic integration, enhancing
defense ties, and consistently upholding international law, this network not only boosts Vietnam’s position
but also strengthens Southeast Asia’s collective resilience against external pressures, both in the South
China Sea and from trade tensions involving the United States and China.²⁷ This strategy establishes Vietnam
as a critical bridge-builder and stabilizer in the region while balancing its interactions with major powers,
notably China and the United States.²⁸ Still, Vietnam’s proactive engagement with its fellow middle powers
is predicated on defending its own national interests and raising its international position, demonstrating
its diplomatic focus on political independence and international integration without challenging the clout of
great powers.

Ties with the United States and China

Vietnam’s neutral but assertive positioning demonstrates how a smaller state can subtly shape its strategic
environment. By refusing to choose sides, remaining anchored in multilateral norms, and cultivating diversified
partnerships, Vietnam encourages both Washington and Beijing to compete for influence through incentives
rather than threats.

However, Vietnam’s capacity to maintain equidistance is not guaranteed. A sharp escalation in the Taiwan
Strait or a crisis in the South China Sea could compel Hanoi to adopt a more decisive alignment, especially
if maritime access or territorial sovereignty were under direct threat. Likewise, the U.S. imposition of punitive
tariffs — particularly those offering little room for negotiation — could restrict Vietnam’s trade flexibility and
drive it to diversify toward alternative markets. As a result, Vietnam’s strategic goal is not just to avoid entrapment
but to shape an environment where such binary choices remain avoidable.

Vietnam’s Relationship with the United States: From Enemy to Comprehensive Strategic Partner

The Vietnam-U.S. relationship has developed dramatically over the past several decades, with the United
States transforming from Vietnam’s historical foe to a close partner Notably, Vietnam is among the few
Southeast Asian countries that tend to favor the United States over China. This is reflected in the 2024
and 2025 State of Southeast Asia reports, where a majority of Vietnamese with experience in policy favored
alignment with Washington.²⁹ This spectacular shift has been particularly evident in the booming trade
volume between the two nations over the past 20 years.³⁰ As of 2025, Vietnam ranks as the United States’ eighth-
largest trading partner, while the United States is Vietnam’s top export market and second-largest trading partner worldwide.³¹

Interestingly, a recent study by two renowned Singaporean scholars found that Vietnam is the only Southeast
Asian nation that has shifted toward closer alignment with the United States rather than China from 2010 to
2024. In contrast, the rest — including U.S. allies like the Philippines and Thailand — moved toward China
in the same period.³² This is particularly significant as the United States appears to be losing influence in
Southeast Asia. Vietnam and the United States also share a close alignment on regional security, especially
concerning the South China Sea, where both oppose China’s territorial claims. Despite this strategic cooperation,
friction remains between the two, particularly regarding escalating tariffs, recognition of Vietnam’s
market economy,³³ and human rights and religious freedom.

As bilateral ties have developed over time, Hanoi’s view of its relationship with the United States has evolved
significantly. Initially, Vietnam considered the United States a major security and political threat, perceiving
Washington’s actions as efforts to overthrow the communist regime by supporting anti-government forces
at home and abroad. This threat perception was reinforced by Washington’s persistent antagonism towards
other authoritarian regimes such as China, North Korea, Laos, Iran, or Cuba. Additionally, Hanoi was concerned
about the United States’ focus on movements promoting human rights, religious freedom, and democratic
reform, often labeling them as “color revolutions.”

However, since the early 2010s, Vietnam has gradually shifted its perspective. Now viewing the United States more as a close partner, particularly in business and regional security, there is a growing sense of strategic trust between the two countries. This transformation has been marked by frequent high-level diplomatic visits by Vietnamese leaders, beginning in 2012, and the formal upgrading of bilateral relations to a comprehensive partnership in 2013. The relationship further deepened through notable milestones, such as VCP General Secretary Nguyen Phu Trong’s formal visit to the White House in 2015, U.S. Presidential visits to Vietnam in 2016 and 2017 (Barack Obama and Donald Trump, respectively), the 2016 U.S. removal of its arms embargo on Vietnam, and visits by U.S. aircraft carriers to Vietnam in 2018, 2020, and 2022. The strengthened partnership culminated in 2023, when VCP General Secretary Nguyen Phu Trong and President Joe Biden announced that the relationship had been upgraded to a CSP during a meeting at the VCP Office in Hanoi — an unprecedented symbolic milestone.³⁴

From Washington’s perspective, Vietnam has evolved from a post-war adversary into a strategically valuable
— if diplomatically cautious — partner. The United States views Vietnam as a critical node in Southeast
Asia’s supply chains, a fast-growing market, and a potential strategic counterweight to Chinese dominance
in the region. Vietnam’s refusal to enter formal alliances is not seen as an obstacle but rather a condition
that the United States has learned to work around. This explains Washington’s increasing willingness to offer
economic and technological incentives — semiconductor cooperation, digital infrastructure support, and
elevated defense engagement — all without demanding formal security commitments.

Vietnam’s Relationship with China: More Business, Less Comradeship, Still a Threat

Vietnam-China relations are characterized by a unique blend of ideological comradeship, historical rivalry,
and economic ties. Politically, the two nations share a history of communism and a Cold War alliance, with
ongoing delegation exchanges for ideological discussion. Hanoi consistently assures Beijing of its reliability
as a close neighbor, particularly as it balances ties with the United States. Over the past decade, however,
Vietnam’s relationship with China has subtly evolved from ideological comradeship to a more pragmatic partnership.
This shift is reflected in a decline in ideological engagement, with fewer high-level discussions on communism, socialis, or Western ideologies.³⁵

At the same time, China remains Vietnam’s leading source of imports and largest overall trade partner as of
2025.³⁶ Vietnam also serves as a key destination for multinational businesses operating cross-border supply
chains or risk-diversifying models in the “China Plus One” strategy. Additionally, Chinese investment in
Vietnam is growing rapidly, driven by factors such as the diversification of supply chains amid rising production
costs in China and U.S.-China trade tensions. As a result, in 2025 mainland China was the second-largest
investor in Vietnam, only after Singapore, with newly registered capital reaching US $3.6 billion for the
year. If Hong Kong is included, China is the largest investor, with investments totaling $5.3 billion for 2025.³⁷

Despite growing economic ties, Beijing remains the most significant security threat to Vietnam, particularly
in terms of territorial and maritime conflicts. Vietnam’s historical legacy, shaped by centuries of Chinese
invasions, continues to influence both government policy and public sentiment. The South China Sea disputes
remain a critical point of tension, encompassing contested islands and a vast maritime zone, including
underwater territories and airspace regulated by international law. For Vietnam, the East Sea (its term for the
South China Sea) is vital for national security, international trade, and access to maritime resources.³⁸

Vietnam is also increasingly concerned about China’s growing influence in neighboring countries, particularly
Laos and Cambodia. In Cambodia, Beijing has become a significant player, with major investments in
infrastructure and security-related projects, such as the Ream Naval Base and the Funan Techo Canal. The
two countries have also conducted joint military exercises. Additionally, Vietnam is worried that upstream
hydropower dams in China and Laos — largely controlled by China — threaten the Mekong River’s flow and
sediment levels. These disruptions could jeopardize Vietnam’s water resources downstream, exacerbating
regional tensions and posing environmental and geopolitical challenges.

Beijing regards Vietnam with a combination of ideological fraternity, strategic concern, and historical rivalry.
China is acutely aware that excessive pressure could drive Vietnam closer to the Western orbit, particularly
in technology and security. This tempers Beijing’s tactics, balancing economic inducements with maritime
assertiveness, while avoiding overt provocations that could alienate Hanoi. For example, Vietnam cooperates
with high-tech firms from the West, particularly the United States, in critical technology infrastructure
sensitive to security risks, such as semiconductors and 5G hardware. Notably, there is no involvement
from Chinese telecommunication giants like Huawei and ZTE, as discussed in the technology section below.
Vietnam’s strategic ambiguity thus compels both great powers to moderate their approaches, incentivizing
constructive engagement over coercion.

Policy Objectives: Domains Shaping Vietnam’s International Posture and Its Relations with Great Powers

Vietnam’s international posture and its relations with major powers, notably the United States and China, are
shaped by critical policy domains, particularly in geopolitics, economic growth, technology, and sustainable
energy. These interconnected priorities define Vietnam’s approach to both domestic development and foreign
policy.

Navigating Growing Great-Power Pressures

Like many Asian nations, Vietnam does not want to take sides in the U.S.-China competition. Instead, it tries
to maintain close and balanced ties with both through diverse channels, including diplomacy, trade and
investment, defense and security, technology, energy, and climate change.³⁹ Drawing on painful Cold War
lessons, Hanoi understands more than anyone that “when a buffalo hits a bull, the flies staying on them will
get crushed accidentally.”⁴⁰ Conversely, Vietnamese policymakers know from experience that when great
powers get too close, smaller nations can also fall victim, as seen following the U.S.-China rapprochement in
the 1970s.

For Hanoi, a state of competition without direct confrontation between great powers — being “not too hot,
not too cold”⁴¹ — brings strategic opportunity.⁴² Consequently, Vietnamese decision-makers believe they do
not face a binary choice between Washington and Beijing but can flexibly engage with a matrix of options
tailored to specific areas and contexts.⁴³

Unlike most Asian middle powers, however, Vietnam must also consider Russia in its U.S.-China strategy,
due to Moscow’s critical role in Vietnamese defense capabilities, particularly in countering Chinese maritime
ambitions. As a legacy of the Cold War, most of Vietnam’s military assets come from Russia. This includes
strategic weaponry to defend its territory and deter armed interventions, such as submarines, fighter aircraft,
long-range missiles, and surface warships. Despite recent efforts to diversify its arms through other nations
such as Israel, South Korea, and even the United States, it may take years — if not decades — for Vietnam to
transition away from its dependence on Russian arms. As a result, Vietnam may suffer if Russia aligns with
China in the event of a conflict in the South China Sea.⁴⁴

To mitigate potential adverse impacts from the great-power rivalry, Vietnam has sought to strengthen security
relations with other major powers, including Japan, India, the U.K., Canada, Australia, and Korea. Additionally,
it has deepened its engagement with multinational institutions such as the European Union (EU), ASEAN,
BRICS, and the Quadrilateral Security Dialogue (the Quad), consisting of the United States, Japan, Australia,
and India. For instance, in June 2025 — not long after President Donald Trump announced that he was
instating sweeping tariffs — Vietnam was recognized as a BRICS partner alongside peers including Belarus,
Bolivia, Kazakhstan, Malaysia, Nigeria, Thailand, and Uzbekistan. Additionally, Vietnam is the second nation
in ASEAN (after Singapore) to conclude a free trade agreement with the European Union. The EU-Vietnam
Free Trade Agreement (EVFTA), which took effect on August 1, 2020, almost entirely eliminates bilateral tariffs.
⁴⁵ Hanoi proactively engages in regular meetings with the Quad, particularly in the wake of the COVID-19
pandemic. Vietnam has become involved in the “Quad-plus,” a regular convention between the Quad and
potential future partners.⁴⁶

Economy and Trade: How to Escape the Middle-Income Trap

Vietnam has set an ambitious goal to overcome the middle-income trap and achieve high-income status by
2045, a goal outlined in its “2045 Vision.”⁴⁷ This requires the country’s gross national income (GNI) per capita
to increase from $4,490 in 2024 to approximately $22,000 by 2045, based on World Bank’s Atlas method. To
meet this target, Vietnam’s GNI per capita would need to grow at an average annual rate of about 8% between
2024 and 2045. Although Vietnam attained upper-middle-income status in early 2025, it now faces the pressures
of a rapidly aging population, making it challenging to maintain this recent growth.⁴⁸

From a geopolitical perspective, a peaceful and secure regional environment is essential to achieve the 2045
Vision. Military conflicts, such as escalating tensions in the South China Sea and the Taiwan Strait, could
disrupt Vietnam’s momentum. Conversely, the ongoing geo-economic conflict between the United States and
China may offer opportunities for Vietnam, particularly in attracting FDI and boosting exports — two critical
pillars of Vietnam’s economic growth model.

Addressing this challenge depends on Vietnam’s ability to strengthen internal capacities, particularly by
removing barriers to the domestic private sector and narrowing gaps in science and technology, education
and training, and modern infrastructure relative to developed economies. These tasks are formidable. In the
two decades since the 1999 Enterprise Law took effect, the private sector’s contribution to Vietnam’s GDP
has stagnated at around 10%, representing less than two-thirds of the FDI sector’s contribution and roughly
one-third of the informal sector’s share.

In education and training, Vietnam boasts a relatively strong K-12 education system, but its universities fall
short. Neither of Vietnam’s national universities in Hanoi and Ho Chi Minh City ranks among the top 1,000 universities
globally, according to the Times Higher Education rankings.⁴⁹ In science and technology, Vietnam’s
investment in research and development was only 0.4% of GDP in 2020, far behind India (0.6%), Malaysia
(1.0%), Thailand (1.2%), and China (2.4%). Similarly, Vietnam’s rate of scientific publications per 1,000 people
was only 0.04, compared to India (0.1), Thailand (0.17), China (0.37), and Malaysia (0.69).

Infrastructure investment in Vietnam remains relatively high, averaging about 7% of GDP annually, second
only to China within the East Asia region. However, most of this investment is directed toward traditional
infrastructure, such as roads, bridges, airports, and seaports, rather than modern infrastructure, such as
5G networks, data centers, cloud computing, and digital public systems. To meet its 2045 Vision objectives,
Vietnam must not only maintain its current investment levels but also shift toward infrastructure that supports
the digital economy.

Technology: Digital Transformation, Supply Chain, and the Semiconductor Industry

Amid growing geopolitical tensions and global supply chain disruption, Vietnam has sought a more balanced
strategy for sustainable growth without dependence on foreign players, exploring a model of economic self-reliance
based on internal resources. However, domestic pillars like agriculture and labor-intensive industries
with uncompetitive Vietnamese firms can maintain only moderate growth, so Vietnamese leaders have turned
to technology as the country’s main economic engine. To implement this strategic focus on innovation and
technology, the government launched the National Program on Digital Transformation in 2020.⁵⁰ To achieve
the program’s ambitious goals, Vietnam recognizes the vital role of partnerships with advanced nations and
leading global technology companies.

Semiconductors play a significant role in Vietnam’s science and technology strategy. The recent AI revolution—
coupled with global semiconductor supply chain disruptions caused by the pandemic and geopolitical
tensions, most notably the U.S.-China tech rivalry—has created new opportunities for countries like Vietnam
to serve as an alternative to China in technology-related manufacturing. Vietnamese leaders see these global
shifts as a strategic opening to move further up the global chip production value chain. 

Following the U.S. CHIPS and Science Act of 2022 and the upgrade of U.S.-Vietnam relations to a CSP, Vietnamese decision-makers accelerated the domestic advancement of the semiconductor industry. Since late 2023, the sector has surged in Vietnam, largely due to foreign partners — primarily from the United States — such as Cadence, Synopsys, Lam Research, and Marvell – investing in chip design, semiconductor manufacturing equipment, and assembly, test and packaging (ATP). Vietnamese leaders have welcomed top U.S. technological giants such as Apple, Intel, NVIDIA, Google, Amazon, and Meta to Vietnam. Additionally, leaders have met with Apple CEO Tim Cook and NVIDIA President and CEO Jensen Huang, both in Vietnam and in the United States. To build the semiconductor workforce and enhance supply chain resilience, Vietnam joined the International Technology Security and Innovation (ITSI) Fund, created under the CHIPs Act.⁵¹

Geopolitically, Vietnam’s digital transformation and burgeoning semiconductor industry are also a gateway to
enter the Western-led technology supply chain. Technologically, however, it may prove challenging to build a
hybrid system with parts from different companies or nations. Over the past decades, Vietnam have selected
European, US or South Korean partners to build their 4G and 5G telecommunication network, excluding
Chinese firms, due to the technological advantage of upgrading existing European facilities as well as the
security risks posed to Vietnam’s critical infrastructure and warned by the US.⁵² For example, the Vietnamese
telecommunication giant Viettel collaborated with Qualcomm, a U.S. chipmaker, to develop the Open RAN
5G base station, making Vietnam — unlike other nations — free from Huawei, one of the world’s largest 5G
suppliers, in building its 5G infrastructure.⁵³ Remarkably, in 2020 Vietnam was among a few Asian countries
that joined the US-led Clean Network initiative excluding Chinese vendors in critical infrastructure such as
telecommunication network or undersea cables.⁵⁴ Likewise, despite their shared ideology, governance and
political regime, Vietnam stood out among several Asian nations that did not adopted China’s surveillance
and public security technology platforms.⁵⁵ Even when Vietnam twisted its policy by awarding minor contracts
of 5G equipment to Huawei and ZTE following Trump’s tariffs on Vietnamese goods in 2025, it received
multiple concerns and warnings by Western officials about the risk of undermining Western trust in Vietnam’s
platform and jeopardizing access to American technology.⁵⁶⁵⁷

To enter the global value chain, Vietnam pursues a diversified approach to technological collaboration, reaching
out to both developed and emerging nations, including other middle powers. As an example of technological
diversification and physical integration to the global telecommunication network, Vietnam launched its
own segment of the subsea Asia Direct Cable (ADC) in April 2025, connecting Singapore, China, Hong Kong,
Thailand, the Philippines, and Japan.⁵⁸ Its CSP with Japan now covers cutting-edge fields like semiconductors,
AI, quantum computing, blockchain, robotics, and 5G/6G, bolstered by research and development, startup
support, strengthened ties between scientific communities, and supply chain integration.⁵⁹ Similarly, Vietnam
is rapidly deepening digital cooperation with South Korea, especially in AI, training engineers, and university
partnerships. Seoul is also investing significantly in Vietnam’s electronics value chain, with plans for AI data
centers.⁶⁰ At the same time, Vietnam is actively exploring opportunities with India in electricity and electronics,
further diversifying its Asian tech partnerships.⁶¹ Collaboration also extends to Australia, focusing on
digital transformation and integration into technology value chains. A key example is the Australia-Vietnam
Strategic Technologies Centre launched in 2025, which focuses on 5G/6G, AI applications, and cybersecurity.
⁶² The EU is another vital partner for Vietnam’s green and digital transformations, with the European Union-
Vietnam Free Trade Agreement (EVFTA) facilitating greater trade and upgrading partnerships in sustainable
development, science-technology, digital infrastructure, and resilient global supply chains.

Vietnam actively engages in the Indo-Pacific Economic Framework (IPEF), a multilateral initiative built on the
four pillars of trade, supply chains, climate, and rule of law and related concerns.⁶³ Through IPEF, Vietnam
seeks to refine its policy frameworks and enhance capabilities in critical digital areas while promoting a level
playing field. IPEF’s Trade Pillar focuses on establishing high-standard rules for secure cross-border data
flows, cybersecurity, and AI development. Simultaneously, the Supply Chains Pillar is vital for resilient supply
chains, especially for semiconductors.

Within ASEAN, Vietnam actively champions regional digital transformation and norm-setting, participating
in the negotiation and implementation of the ASEAN Digital Economy Framework Agreement (DEFA). In
January 2026, it hosted major technology events, such as International Digital Week and the ASEAN Digital
Ministers’ Meeting. Under Vietnam’s leadership, the region is developing the ASEAN Digital Masterplan 2030
(ADM2030) to harmonize digital trade rules, ensure data security, and foster a common understanding of AI
governance.⁶⁴

Ultimately, Vietnam is pursuing a multifaceted approach that underscores its ambition to build a resilient,
innovative, and independently capable technology sector — one that is deeply integrated globally but less
vulnerable to any single power. By strategically focusing on digital transformation, and robust supply chains,
Vietnam and its partners are not necessarily forming a new bloc, independent from the United States or
China. Instead, they are pursuing a “de-risking” strategy through diversification and collective action, striving
to create a more inclusive digital ecosystem that encourages the great powers to engage rather than
dominate.

Energy and Climate Change

Over the past three decades, Vietnam has consistently ranked among Asia’s fastest growing economies. This
rapid development has necessitated a substantial increase in energy—a need that will only grow if Vietnam
is⁶⁵ to transition into an advanced economy by 2045. Furthermore, the country’s newfound focus on the
technology sector for economic growth will necessitate even more energy for AI, data centers, and semiconductors.
At the same time, ongoing and proposed megaprojects, including urban mass rapid transit systems
in Hanoi and Ho Chi Minh City and the electrified North-South high-speed railway, will amplify electricity
consumption. This soaring demand is one of the biggest challenges to Vietnam’s development, given current
constraints in domestic power sources.⁶⁶

Vietnam’s energy problem is made even more complex because it must be solved in tandem with the climate
change factor. Vietnam is among the five nations most affected by climate change,⁶⁷ particularly in the
Mekong Delta. Notably, the country’s energy sector accounts for more than half of its greenhouse gas emissions
— more than the agriculture, industry, and waste sectors.⁶⁸ Moreover, at the 2021 UN Climate Change
Conference (COP26), Vietnamese Prime Minister Pham Minh Chinh made an ambitious commitment to reach
net-zero emissions by 2050.⁶⁹

To tackle the complex conundrum of energy and climate change, while avoiding overreliance on any one
power, Vietnam has ramped up its collaboration in green energy and climate adaptation through a network
of international partnerships. For instance, USAID has supported Vietnam through various projects and
programs related to climate change and renewable energy.⁷⁰ In 2022, Vietnam also collaborated with the
International Partners Group — including the United States, the EU, the U.K., France, Germany, Italy, Canada,
Japan, Norway, and Denmark — in the Just Energy Transition Partnership (JETP), with $15.5 billion in funding
to support the country’s green transition.⁷¹

Other Asian nations are also essential to Vietnam’s green energy and climate strategy. Japan has pledged
$20 billion for low-carbon energy projects,⁷² while South Korea is boosting hydrogen cooperation and fostering
green industrial development.⁷³ Australia is allocating AUS $105 million (about US $75.35 million) for
sustainable infrastructure and clean energy, supporting large-scale renewable projects and climate resilience
efforts.⁷⁴ India is exploring collaborations in renewable energy, green agriculture, and circular economy
initiatives.⁷⁵ Additionally, the trilateral cooperation between Vietnam, Singapore, and Malaysia in a project to export 2,000 MW of renewable offshore electricity to Singapore and Malaysia via subsea cables has connected Vietnam to the ASEAN Power Grid.

Driven by its ambitious net-zero pledge and acute vulnerability to climate change, Vietnam has been taking
a larger leadership role among emerging economies in global climate forums. This is evidenced by Hanoi’s
consistent participation in and hosting of high-level international climate discussions, such as the second
ASEAN Future Forum, which was held in Hanoi in February 2025. Prime Minister Pham Minh Chinh used the
event to underscore Vietnam’s commitment to its green transition goals.⁷⁶ Moreover, Vietnam hosted the 4th
Partnering for Green Growth and Global Goals (P4G) Summit in April 2025, a critical platform for international
collaboration on global climate.⁷⁷

Building on its growing leadership role, Vietnam is collaborating with other committed partners to collectively
request increased climate financing and technology transfer from major global actors.⁷⁸ As the third
country to launch a JETP — following South Africa and Indonesia — Vietnam is directly involved in a mechanism
designed to mobilize substantial climate finance from developed nations. Complementing this, within
the P4G framework, Vietnam has established partnerships with Japan, South Korea, the UAE, Bangladesh,
Indonesia, Denmark, Netherlands, South Africa, Ethiopia, Kenya, Columbia, Mexico, and Chile to “channel
global climate finance into national climate transitions” through innovative public-private partnerships.⁷⁹ At
the 2025 P4G Summit, Prime Minister Chinh called upon developed countries to “promote their pioneering
role in providing financial support, technology, and management experience to help developing and least
developed countries make green transition.”⁸⁰ At the expanded G7 Summit in 2023, Chinh urged members to
strengthen support for developing countries in “technology transfer, capacity building in institutions, infrastructure,
human resources, and governance methods, and building an ecosystem for clean energy development.”
⁸¹ Vietnam’s leadership is further underscored by its role in the core group of nations advocating for the
UN General Assembly resolution calling for the International Court of Justice’s advisory opinion on national
climate obligations. By championing this legal framework, Vietnam reinforced its commitment to climate justice
and equitable support for vulnerable nations.⁸² In July 2025, the International Court of Justice delivered
its landmark advisory opinion on state obligations regarding climate change, marking the conclusion of the
process Vietnam joined in early 2024.⁸³

How These Domains Position Vietnam Amid Great-Power Competition

Vietnam has managed the escalating U.S.-China great-power rivalry by broadening its economic engagement
with both powers, deepening cooperation with other regional middle powers, and using geoeconomic competition
to further its own development objectives.

Officially, Vietnam refuses to take sides; practically, it adopts issue-based alignments. In terms of trade and
investment, Vietnam clearly avoids taking sides amid growing U.S.-China competition. On the contrary, it
requires engagement with both powers — and as many other economic partners as possible, regardless of
political alignment — to reach its ambitious development goals for 2030 and 2045.⁸⁴

Unlike its dual approach to trade and investment, Vietnam tends to align with the United States and its allies
when it comes to technology and innovation.⁸⁵ Notably, Vietnam’s critical infrastructure — such as telecommunication
networks, the internet industry, 5G equipment, data centers, power transmission systems, banking,
and utilities — relies primarily on Western hardware and software.⁸⁶ Reasonably, Vietnamese leaders
remain wary of the security risks and technological dependence associated with China, given their complex history and ongoing territorial disputes.

A less sensitive area where Hanoi demonstrates its bamboo diplomacy is transportation infrastructure. In
this sector, Vietnam has shown greater willingness to welcome Chinese investment over the past several
years.⁸⁷ Recently, the Vietnamese government, including authorities in Hanoi and Ho Chi Minh City, has
engaged with Chinese partners regarding the development of urban subway systems.⁸⁸ This move signifies a
strategic shift in Vietnam’s approach, transitioning from cautious participation in the Belt and Road Initiative
(BRI) to a more proactive stance aimed at fostering essential infrastructure development and enhancing connectivity
within the regional railway network. This shift can be attributed to top VCP leaders’ motivation to
sustain high GDP growth by boosting public investment and building infrastructure. Leaders aim to deliver
widely recognized achievements ahead of the upcoming VCP Congress in 2026; however, these megaprojects
demand enormous capital at a time of budget constraints and overreliance on FDI and exports amid global
economic uncertainties.

While climate change and environmental protection remain sectors where Vietnam collaborates primarily
with the United States and other Western nations, the energy sector has emerged as critical ground for competition
and partnership with both the United States and China. Based on its international integration strategy
and China’s progress in its energy transition, Vietnam is increasingly open to collaboration with China
through a number of projects involving thermal, solar, and wind energy. Nevertheless, the Trump administration’s
retrenchment from multilateral institutions and climate-and environment-related commitments has
reduced U.S. engagement in this domain, creating greater scope for China to expand its influence and accelerate
energy cooperation with Vietnam.

Such “adaptive siding” grants Vietnam significant flexibility, allowing it to navigate complex geopolitical
currents without provoking confrontation from any great power. Moreover, Vietnam’s ability to remain on
good terms with global powers encourages these actors to recalibrate their competitive strategies, aiming to
gain influence without pushing this crucial middle power into a rival camp. Particularly, China has sought to
strengthen relations with Vietnam, increasing high-level visits, driving trade and investment, facilitating agricultural
exports, and, most recently, discussing railway projects. Notably, despite ongoing Chinese patrols in
Vietnam’s Exclusive Economic Zone, Beijing remained quiet during Hanoi’s significant land reclamation in the
South China Sea throughout 2023-2024 — a stark contrast to its aggressive actions against the Philippines.⁸⁹
Similarly, the United States has rapidly deepened its ties with Vietnam over the past decade, with visits by all
presidents from Bill Clinton to Joe Biden. The United States has accelerated trade, rescinded lethal weapon
sales bans, increased naval ship dockings, and included Vietnam in its IPEF strategy, culminating in the
unprecedented milestone of upgrading relations to CSP.⁹⁰

In short, Vietnam has tried its best to walk the tightrope of relations between the United States and China by
engaging both powers in trade, investment, and energy. Strategically, Hanoi has selectively aligned with the
United States and the West in advanced technology and environmental initiatives while welcoming Chinese
investment in transport infrastructure. The country leverages the rivalry for its own strategic development
while offering opportunities for both powers to win influence and solidify their position in Southeast Asia.
However, given its lack of internal resources and ambitious goal to achieve developed nation status by 2045,
Vietnam has neither the intention nor the capability to substantially influence the U.S.-China contention.
Still, Vietnam’s position and policies may incentivize the great powers to adjust their regional strategy and
tactics, seeking to mobilize supportive nations and secure a long-term competitive advantage.

How These Domains Position Vietnam in Its Relations with Other Middle Powers

As noted, pressure from the U.S.-China competition motivates Vietnam to expand and intensify relations
with other middle powers. This enables Hanoi to strengthen its international position through collective
power without joining an alliance against any great power. At the same time, other middle powers, such as
India, Brazil, Singapore, Indonesia, Malaysia, the UAE, Saudi Arabia, Turkey, South Africa, and Nigeria, may
find that Vietnam shares many of their goals. In a globalized world, partnership networks in trade, investment,
technology, energy, and environmental protection have the potential to benefit everyone involved.
Consequently, when Vietnam strengthens its geopolitical position, increases trade and FDI, achieves higher
economic growth, hastens its digital transformation, grows its role in global supply chains, and augments
its sustainable energy sources, it will offer political and economic opportunities for other middle powers.
For instance, the country’s 20 free trade agreements with the world’s largest trading partners or its growing
integration into China’s supply chains could be gateways for other middle powers to benefit from investment
in or trade with Vietnam.

Areas in Which Vietnam Is Most Interested in Seeking Autonomy

Vietnam’s overarching goal for the next two decades is to foster industrialization and modernization to build
an independent, autonomous, and self-reliant economy capable of achieving developed, high-income status
by 2045. However, this ambitious goal faces a range of structural and geopolitical challenges across two critical
domains: first, international trade and investment, and second, industrialization.

Pursuing Trade and FDI Autonomy to Mitigate Strategic Risks

Vietnam seeks greater autonomy in trade and foreign direct investment (FDI) to mitigate vulnerabilities arising
from its dual dependencies on China for imports and FDI, and on the United States for exports. While
China is Vietnam’s largest supplier of raw materials and intermediate goods, the United States purchases
nearly 30% of Vietnam’s total exports, making both relationships critical yet also poses risks of overdependence.
The ongoing U.S.-China rivalry underscores Vietnam’s need to diversify its economic partnerships to
improve resilience and protect its strategic autonomy.

FDI is extremely important to Vietnam’s economy. As of 2024, FDI accounted for 20.5% of GDP, 16.5% of total
investment, and 71.7% of total exports. Moreover, Vietnam’s strategic economic priorities, including digital
transformation, green transition, semiconductors, and artificial intelligence (AI), are heavily influenced by the
geopolitical and investment climate surrounding the FDI sector. This creates a critical dilemma for Vietnam:
while achieving high-income status requires deeper international economic integration, excessive reliance
on external factors poses risks. Balancing economic interdependence with autonomy will be a crucial factor
in realizing Vision 2045.

China has become increasingly dominant in Vietnam’s supply chains, with imports from China rising from
$0.4 billion in 1995 to $144.2 billion in 2024 (see Figure 1). This dependence exposes Vietnam to supply-side
disruptions while entrenching it in low-value manufacturing. At the same time, Vietnam’s strong export ties
with the United States, driven by goods like textiles and electronics, highlight a demand-driven dependency.
This necessitates a delicate balancing act, as overreliance on either nation could jeopardize Vietnam’s economic
stability and diplomatic flexibility.

Additionally, Vietnam has become increasingly reliant on FDI from China to drive its economic growth. The
share of registered FDI from China more than tripled from 2.8% between 2010-2016 to 9.0% between 2017-
2023. This reliance has deepened as Chinese investments target manufacturing, energy, and infrastructure
— sectors central to Vietnam’s industrialization and modernization strategy. Today, China ranks as one of
Vietnam’s top five foreign investors, leading in the number of newly approved projects as its focus shifts from
manufacturing and equipment toward high-tech industries and renewable energy.

Figure 1. Vietnam’s Trade Balance with the United States and China (1995 -2023)

Source: Authors’ calculation from data published by Vietnam’s General Statistical Office

Vietnam is seeking autonomy for two reasons: reducing exposure to external economic shocks and strengthening
its ability to navigate intensifying geopolitical tensions. Geopolitically, autonomy allows Vietnam to
maintain sovereignty in contentious areas like the South China Sea while preserving balanced relations with
both superpowers. Economically, reducing reliance on China and the United States supports Vietnam’s goal
of transitioning to a knowledge-based economy and climbing the global value chain.

To achieve this, Vietnam has adopted a multipronged strategy. First, it is diversifying trade relationships
through free trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA). It has also participated in the
Regional Comprehensive Economic Partnership (RCEP). These agreements reduce dependency on both China
and the United States by opening access to alternative markets in the EU, Japan, and other major economies.
 

Second, Vietnam is attracting FDI from a broader range of sources — including South Korea, Singapore,
Japan, and the EU — to reduce reliance on Chinese investments. FDI from these nations supports advanced
manufacturing, technology, and sustainability, aligning with Vietnam’s long-term development goals. The government
also encourages domestic production to build self-sufficient supply chains and invests in high-tech
industries like AI, semiconductors, and renewable energy.

Third, Vietnam leverages its role in the “China Plus One” strategy, positioning itself to attract multinational companies seeking to diversify production bases away from China. Regionally, Hanoi is deepening economic integration through ASEAN and further expanding its trade and investment networks via partnerships with countries like India, Australia, and Canada.

Domestically, Vietnam is addressing structural weaknesses in its private sector to boost local manufacturing
capabilities. At the same time, it is promoting innovation in strategic sectors to reduce reliance on low-value
exports and import-heavy industries.

By balancing its trade and investment relationships, Vietnam aims to mitigate risks associated with dependency
on China and the United States, enhance its economic resilience, and chart a sustainable path for
growth amid intensifying geopolitical competition.

Unlike its East Asian predecessors, such as South Korea or Taiwan, Vietnam has yet to produce global champion
firms with advanced technological capacity or global brand recognition. Instead, it has relied heavily on
export-oriented FDI. While effective for job creation and trade integration, this model has limited the development
of indigenous innovation ecosystems. In this sense, Vietnam’s current position more closely resembles
that of Malaysia or Mexico, where foreign-led growth has driven integration into global supply chains but not
consistently translated into domestic technological upgrading. Going forward, Vietnam must transcend its
low-cost, assembly-based growth model by investing systematically in industrial upgrading, research and
development (R&D) capacity, and domestic firm capability.

Building a Strong, Independent, and Self-Reliant Economy Through Industrialization

Vietnam’s industrialization and modernization strategy rests on four pillars: science and technology, digital
transformation, green transformation, and the semiconductor industry. In his public discourse, “Digital
Transformation: An Important Driving Force for Developing Productive Forces, Perfecting Production Relations,
and Advancing the Nation,” published on the 79th anniversary of Independence Day, General Secretary Tô
Lâm emphasized the critical role of digital transformation in propelling Vietnam into a new era. Building on
this vision, the Politburo issued Resolution No. 57-NQ/TW on December 22, 2024, outlining a transformative
strategy to foster breakthroughs in science, technology, innovation, and digital transformation. A Central
Steering Committee, chaired by the general secretary himself, was established to spearhead these initiatives.
 

The resolution positions digital transformation not only as technological adaptation but as a revolutionary
force redefining Vietnam’s production mode and restructuring its governance framework (“superstructure”).
This paradigm shift seeks to modernize state management, promote innovative economic models, and ensure
synergy between governance structures and digital infrastructure. Importantly, it emphasizes maintaining
Vietnam’s socialist identity, fostering inclusivity, and ensuring equitable resource distribution while navigating
this transformative era.

Geo-economic and geopolitical dynamics add complexity to Vietnam’s aspirations. Intense global competition
for digital leadership demands that Vietnam navigate trade barriers, technological dependencies, and
intellectual property challenges. Regionally, it must differentiate itself from established digital leaders like
Singapore and Malaysia, all while not relying too heavily on foreign technologies from a single source OR from
the United States or China. Geopolitically, Vietnam must safeguard its digital sovereignty and cybersecurity
while engaging with global powers such as the United States, China, and the EU, balancing cooperation with
the need for strategic independence.

To address these obstacles, Resolution No. 57-NQ/TW advocates investing in cutting-edge digital infrastructure, such as 5G and AI, reforming legal frameworks to foster innovation, and enhancing human capital through
specialized education and training. It also underscores the importance of integrating Vietnam into international
digital governance frameworks and cultivating globally competitive domestic tech enterprises.

As General Secretary Tô Lâm asserts, the digital era demands bold reforms to align governance with the evolving
“digital mode of production.” This transformation integrates human and artificial intelligence, with data
as a key asset, fundamentally reshaping production relations and governance structures. Vietnam’s goal is to
harness the potential of this revolution while preserving socialism’s core values, constructing a socialist-oriented
market economy that ensures equitable and inclusive development in the digital age. Looking ahead,
the country’s most promising windows of opportunity lie in next-generation sectors such as semiconductors,
digital services, and clean energy. Its strong manufacturing base, youthful workforce, and expanding digital
infrastructure position it well to participate in regional tech supply chains. However, to move beyond contract
manufacturing into higher value-added segments, Vietnam will need to reform its innovation institutions,
deepen human capital, and ensure regulatory coherence in digital governance. Similarly, while Vietnam’s bold
net-zero pledge opens space for technological upgrading and climate finance, realizing its potential depends
on overcoming governance fragmentation and strengthening domestic firms’ integration into green value
chains.

Collaborative mechanisms with other middle powers — such as joint R&D initiatives with India or South
Korea, green tech transfer from Australia or the EU, or coordinated bargaining within multilateral platforms
— could support Vietnam’s transition. These partnerships could help Hanoi avoid excessive dependency on
any one power while embedding it more deeply in rule-setting processes for emerging sectors.
In sum, while Vietnam’s economic ascent has been impressive, sustaining this momentum will depend on
converting FDI-led integration into homegrown innovation. By learning from middle powers that have managed
to do so and avoiding the middle-income traps that have stalled others, it can secure its path toward
becoming a high-income nation.

Conclusion and Recommendations

Vietnam’s emergence as a middle power is shaped as much by its internal political economy as by its external
geopolitical environment. As the only communist regime among the world’s middle powers — and one navigating
a long, historically fraught relationship with both the United States and China — Vietnam occupies
a distinct and complex position in the international order. Its central ambition remains developmental: to
transform into an upper-middle-income country by 2030 and a high-income, advanced economy by 2045.
This long-term aspiration of consolidating its status as a middle power while avoiding middle-income traps
shapes Vietnam’s strategic calculus and underpins a diplomatic posture that prioritizes political stability,
economic performance, and strategic autonomy.

To pursue these aims, Vietnam has institutionalized a foreign policy centered on political independence and
international integration. It resists domination, avoids formal alliances, and engages a wide array of partners
across ideological divides. Its approach, often described as “bamboo diplomacy,” is grounded in realism: firm
in defense of national sovereignty and long-term interests, but flexible in tactics, partnerships, and diplomatic
framing. While this strategy is fundamentally defensive, it has yielded broader influence than Vietnam
officially claims or seeks.

In navigating the intensifying U.S.-China rivalry, Vietnam has charted a careful middle path that moves beyond mere survival or avoidance. By maintaining credible neutrality, building overlapping partnerships, and consistently
defending a rules-based order in forums and international free trade agreements (such as ASEAN,
CPTPP, and RCEP), Vietnam has subtly reshaped engagement from both Washington and Beijing. The United
States has increasingly offered Vietnam asymmetric benefits — economic, technological, and strategic —
without requiring formal alignment. At the same time, China has exercised greater restraint than with other
neighbors, recognizing that excessive pressure may drive Hanoi toward Western powers. As a result, Vietnam
has positioned itself not only as a state to be courted, but as a state whose posture actively influences the
behavior of rival powers.

Vietnam’s autonomy varies considerably across domains. It has gained strategic space in diplomacy, digital
infrastructure, and multilateral climate engagement, often with support from middle-power partners.
However, it remains constrained by defense dependencies, an FDI-dominated industrial base, and the formidable
resource demands of its energy transition. These structural limits narrow its bandwidth for long-term
influence, even as its short-term leverage expands.

Still, Vietnam’s case exemplifies the capacity of middle powers to shape their environment, even without
force or formal leadership roles. Through deliberate ambiguity and targeted cooperation, Vietnam has helped
lower the temperature of regional tensions and carved out influence disproportionate to its size. This influence
is not rooted in coercive power but in geopolitical neutrality and developmental focus.

Vietnam’s trajectory also highlights the strategic value of “median voter states” in a bifurcating world. By
signaling that partnership — not pressure — is the most effective basis for engagement, Vietnam contributes
to reshaping the incentive structures that govern great-power behavior in Southeast Asia. When emulated by
other middle powers, this posture can help reinforce norms of restraint and pluralism.
The Vietnamese experience raises several questions of broader relevance. Can Vietnam sustain its balancing
posture if the U.S.-China rivalry escalates into open confrontation over Taiwan or the South China Sea? What
institutional frameworks might allow Vietnam and other middle powers to coordinate more systematically
on global issues such as climate change, digital governance, or supply chain resilience? And what forms of
middle-power leadership — coalitional, normative, or issue-based — can realistically shape outcomes in a
contested order?

Vietnam may not seek to lead or recalibrate global power dynamics, but its consistent neutrality, commitment
to multilateralism, and refusal to align with maximalist positions have effectively shaped how the United
States and China engage with it — and, by extension, how they engage with the region. Its balancing strategy,
especially when mirrored by other middle powers, can incrementally de-escalate major-power rivalry.

Recommendations for U.S. Leadership

The U.S. government should adopt a calibrated and strategic approach toward Vietnam, treating it as a middle
power while recognizing its distinctive political economy and unique geopolitical position, particularly in relation
to China and Russia. Strengthening economic cooperation is essential, especially in trade, investment,
and technology. Priority should be given to digital transformation and the semiconductor industry, alongside
integrating Vietnam into Western-led supply chains and climate change initiatives. In security and defense,
the United States should deepen cooperation while respecting Vietnam’s policy of nonalignment, maintaining
robust support for Hanoi’s position in the South China Sea disputes. Regarding trade, Washington must exercise
restraint in imposing tariffs due to Vietnam’s trade surplus or alleged transshipment of Chinese goods.

Enforcement should be fair and targeted, distinguishing between rerouted Chinese products and those genuinely
produced or value-added in Vietnam using Chinese inputs. Finally, it is crucial to manage sensitive
political differences, including human rights, religious freedom, and civil society issues, with respect and
dialogue rather than coercion.

Recommendations for Chinese Leadership

China should strengthen economic cooperation with Vietnam through enhanced trade, investment, and transport
infrastructure development. Beijing should also recognize that Hanoi’s deepening ties with Washington
are not an alignment against China, but rather a reflection of Vietnam’s historical experience and its pursuit
of national interests. Rather than viewing these relations through a zero-sum lens, China should assess the
situation carefully and acknowledge the potential benefits, particularly in trade and investment. Crucially,
China must de-escalate maritime disputes with Vietnam by ceasing aggressive actions in the South China
Sea, such as surveys in Vietnam’s Exclusive Economic Zone and harassment of its fishing vessels and energy
operations. Any escalation may eventually cost China far more than Vietnam — economically, politically, and
diplomatically. Additionally, China should consider Vietnam’s concerns over Beijing’s increasing dominance
in the Mekong region, especially regarding its leverage over Laos, Cambodia, and the upstream Mekong River.
A more restrained, cooperative approach will help stabilize China-Vietnam relations and prevent potential
tensions from undermining China’s broader strategic interests in Southeast Asia.

Recommendations for Vietnamese Leadership

As global tensions rise, Vietnam faces growing risks of being drawn into the U.S.-China rivalry — or worse,
becoming a pawn in a new U.S.-China-Russia triangle. When Washington and Beijing are at odds, Vietnam’s
development momentum suffers; when they are in harmony, the country risks being sidelined. To avoid both
traps, Vietnam must continue practicing agile, principled bamboo diplomacy by rebalancing relationships,
repositioning itself as needed, and protecting its autonomy.

At home, the most urgent task is launching a second wave of reform — a “Doi Moi 2.0.” This means unlocking
domestic potential by strengthening the private sector, removing institutional bottlenecks, and building a
more effective and accountable state. Without stronger internal foundations, Vietnam will remain vulnerable
to external shocks and overdependent on foreign capital, markets, and technology.

Vietnam should also invest more in middle-power coalitions — leveraging ASEAN, BRICS+, IPEF, and other
issue-based platforms — to hedge smarter, not harder. These networks provide a stage to amplify Vietnam’s
voice, diversify risk, and offer alternatives to binary alignment. In emerging strategic sectors like semiconductors,
clean energy, and digital governance, Vietnam has an opportunity to lead. These are not just economic
goals but geopolitical tools. By positioning itself as a trusted partner in regional tech and climate transitions,
Vietnam can increase its leverage while minimizing the risk of confrontation.

Above all, Vietnam must shift from merely “not choosing” to selectively leading, clarifying where it stands
and what it wants. Strategic ambiguity has served Vietnam well in the past, but in an increasingly fragmented
world, clarity — on rules, partnerships, and reform — can be even more powerful. A more confident, coherent
Vietnam will not only safeguard its interests but also shape how external powers engage with Southeast Asia.