Given the importance of financial sector development for sustained economic growth, especially in the context of Vietnam’s own performance since embarking the Đổi Mới economic reforms twenty years ago, the objective of this study is to analyze the financial sector development in Vietnam and China within the framework of financial sector reforms introduced in the two countries. The study will assess the progress to date and future challenges for each country; compare and contrast financial sector reform strategies and performance; and formulate policy recommendations for further financial sector reform in Vietnam.

The methodology of this study is to draw on the existing literature on financial sector development to design a conceptual framework for analysis of the sector reforms introduced in Vietnam and China. The study focuses on three key dimensions of reform: financial sector liberalization; financial sector deregulation; and financial sector stabilization. The conceptual framework is then applied to a comparative review of financial sector development in Vietnam and China, relying mostly on secondary sources for descriptive data and on interviews for supplementary data to assist in interpreting this information. The same conceptual framework is used to formulate suggestions for future financial sector reforms in Vietnam by linking policy analysis to the recommendations.

Due to the extreme sensitivity of the subject the limitations of the study pertain to access to information and data. Many financial institutions consider their data proprietary, and are thus reluctant to share information with external parties for fear of breaching client confidentiality, exposing internal weaknesses to customers and regulators, and giving away trade secrets to competitors. Financial sector policy makers and supervisors share this reluctance to share information for fear of exposing their institutional shortcomings and national vulnerabilities. Thus, there are significant data gaps, which when filled, could alter some of the findings and recommendations of the study; these gaps are duly noted as they appear in the text. Moreover, similarities and differences between Vietnam and China should not be viewed as “best and worse practices,” but rather, as a source for discussion and reflection in the hope that experiences elsewhere might help to better understand the situation in Vietnam and provide ideas that could be adapted as per requirement and capabilities.