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Vietnamese anti-corruption drive threatens housing sector, but China-style meltdown remains unlikey

Despite being one of the world's fastest expanding economies in 2022, Vietnam is facing growing headwinds as a corruption drive and real estate woes dim the outlook, according to Nikkei. Tighter regulations in real estate, a corruption drive, and Chinese dumping of excess steel have disrupted a tight demand-supply balance in the country.

The Communist Party General Secretary led a campaign against corruption, concentrating on illegal deals in financial markets linked to the real estate industry. The crackdown has spawned concerns about the stability of real estate companies and financial institutions. The government has also slowed new permits for development, causing long delays in many condominium and infrastructure projects.

These anti-corruption actions have triggered a property market slump that coincides with weakness in the Chinese housing sector, which consumes about 60% of global steel production.

While reminiscent of the Chinese Communist Parties' years-long campaign to crack down on private sector "abuses," real estate only contributes around 3.6% of Vietnam's GDP compared to 15-30% in China. While a broader economic crisis is less likely, the flood of cheap Chinese steel into southeast Asia threatens Vietnam Inc., the largest steel producer in ASEAN.

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