The United States and China in the Vietnam War: Aids

As one of the most important day of contemporary Vietnamese history is approaching, let’s revise one history lesson about ties of aids in the context of the Vietnam War (aka the American War).

The general history of Vietnam marked 1954 a year of victory over colonialism but also the beginning of American intervention. However, as histories unfold, long before the French retreated, the United States had already appeared in the region to assist France while gradually taking advantage of the situation to establish its influence. Soon after the Geneva Accords of 1954, in the name of communism containment, the US officially arrived in southern Vietnam and helped establish and maintain the Republic of Vietnam. As the war escalated, the US sent increasingly more aids to the South government (GVN) – the action that in turn made the war increasingly more expensive. At the same time, in northern Vietnam, China was assisting the Viet Minh, who under Ho Chi Minh’s leadership proclaimed the Democratic Republic of Vietnam (DRV). Ho Chi Minh and his comrades’ choice of the Chinese Communist Party (CCP), and therefore the Soviet Union (USSR)[1], for help to achieve independence after being refused by the US polarized the Cold War (Zhai). Interestingly, the Chinese involvement in the war has been rarely mentioned in the modern history of Vietnam. Nonetheless, in spite of the local view of a resistance for independence, the Vietnam War comprised of battlefields between China and the US to exhibit their respective influence and to contain each other’s ideological force. A commitment for Vietnam was a commitment for their respective power.

The First Indochina War transformed into the American War even before the negotiation of interested parties in the Geneva Accords of 1954 resulted in the partition of Vietnam. Financing more than 80% of French expenditures in the last years of the First Indochina War, the US gradually replaced its ally in Vietnam. According to Dang Phong, author of “21 năm viện trợ Mỹ ở Việt Nam,” French General Henri Navarre reflects that with American aids, France already lost Indochina regardless of any outcomes. In fact, in 1945 the defeat of Japan – which invaded Vietnam successfully but still kept the French rule – allowed the US to weaken the French influence while indirectly becoming visible in Vietnam with their other allies: British troops in South Vietnam and Chiang Kai-shek’s army in North Vietnam. Phong describes that this period was the first time the Vietnamese would see American products, which were brought by these allies; and since then South Vietnam has never had a true economy.

After the French lost, in order to ensure that it still can collect debts, the US agreed for France to repay with francs instead of dollars, allowing France to sell goods while creating a reserve of francs to send aids to South Vietnam, which in turn would used them to buy French goods. This so-called ‘triangle of the franc’ (le franc triangulaire), according to Phong, ensured that the U.S. would have control over the circulation of the money. Douglas Dacy, author of “Foreign Aid, War, and Economic Development: South Vietnam, 1955-1975observes it also kept Vietnam essential for the US “to achieve a military-geopolitical goal – that of keeping the country in the Western sphere of influence”. In other words, it helped to avoid threat from the communist North, by building the image of the US as merely an ally with aids on the surface while structuring the local economy that would eventually become profitable for the US both politically and economically. Because of the political instability the war created, the US continued to increase the amount of aids.

In fact, the support of the US to build and finance the GVN came largely in the form of aids. The total amount of aids from 1955 to 1960 is estimated at US$ 2 billions, according to Phong. In 1955, with support from the US, the establishment of Ngan hang Thuong tin, a commercial bank, helped facilitate imports by Vietnamese businessmen and limit the trading activities of the French and the Chinese expatriates, who had dominated international trade previously. In addition, because the US disagreed to create a new national currency, the GVN didn’t have direct control over this circulation. This new institution, nonetheless, affected the improvement of agricultural and manufacturing industries. Yet economic development was not a priority although the expense for South Vietnam was tremendous, especially during the period of ‘Vietnamization’ that began in 1969, when the U.S. attempted to stabilize South Vietnam so that the latter could sustain itself more effectively.

While this policy would allow the US to gradually withdraw their army, it also means larger aids packages would soon arrive in South Vietnam. According to Phong, the aids even amounted as much as 33,8 billion dollars in 1973. Specifically, the US Agency for International Development Mission to Vietnam (USAID-VN) helped to create and expand numerous facilities, including textile, pharmaceutical, plastics, and animal feed industries. Yet there was no significant industrial development, as both Phong and Dacy observe. Moreover, Phong maintains that USAID-VN also discriminated imported goods from countries other than the US and their allies to South Vietnam by inspection and taxation, which could climb up to 210% for normal goods or 500% for luxury ones. From 1964 to 1967, the level of total imports doubled to more than US$600 million, according to the Report to the Ambassador from the Director of the United States Agency for International Development, Vietnam. As a result, South Vietnam turned into a huge market for imported goods from the US and the related countries that were involving in similar versions of the aforementioned triangle of the francs.

The politics of aids in this political instability increased the dependence of South Vietnam on the US. On one hand, South Vietnam received those aids from the Public Law 480 Commodity Sales for Currencies, or shortly PL 480. Under PL 480, the Food for Peace program was designed to improve productivity of farmland yields and stabilize the prices of agricultural products. Because many farmers left their land to find security and employment opportunities in urban areas while many others were dislocated by conditions of the war, improvements in agriculture became necessary, especially when the population of the country kept rising and the North communists secretly got in touch with many South peasants. In 1967, the introduction of fertilizer, pesticides and other new farming methods has improved productivity of each hectare being worked, “particularly in the case of vegetables which enjoyed attractive prices for the farmers”, as documented in the above report.

Moreover, according to the same report, new high-yielding rice varieties like IR-8 and IR-5 were also introduced to Vietnamese farmers; and during the 1969-1970 crop year, the amount of paddy rice increased by 749,000 metric tons compared to the previous year. In 1970, there were also programs to achieve diversification in agriculture and enhancement of feed grains productions to support the livestock and poultry industries.

However, despite new technologies and training assistance, the agricultural sector could not become more self-sustaining: during the late 1960s when the conditions of the war became worsened, South Vietnam actually turned from an exporter to importer of rice. Phong writes South Vietnam Vice President Nguyen Cao Ky remarked in 1969 that even though South Vietnam was an agricultural country, there were no real agricultural production capacities; instead, what the country had was imported cars, imported televisions and imported perfume. Economically, what American aids brought to South Vietnam was mainly consumerism. The economic problems in South Vietnam revolved around the issue of the economic dependence on aids from the US. In addition, during the roughly twenty years that the US maintained the GVN, it spent US$8.5 billion for the economy in addition to another US$17 billion for military aids, according to Dacy. However, the US counted categories like salaries and benefits for American personnel in economic aids, which made the South Vietnam economy actually more fragile than it appeared. Hence, as soon as the US had to withdraw because its citizens did not want to continue to sacrifice both people and capitals, the South Vietnam easily disintegrated. According to Phong, by 1970, many high-level governors and finance personnel already admitted that once the US left with their aids, South Vietnam would collapse.

Meanwhile in North Vietnam, China was also actively sending aids to show solidarity with its Vietnamese comrades as well as to ensure that American intervention in South Vietnam would be limited. In fact, according to Qiang Zhai, author of “China and the Vietnam Wars, 1950-1975”, the Chinese didn’t have much interest in a unified Vietnam because a fragmented Indochina would benefit their rise of influence in the region[2]. However, witnessing the US escalation in South Vietnam, especially after the defeat of Chinese nationalists and the turnout of the Korean War[3], China believed American aggression was targeting China. Further, as Zhai points out, China was also concerned with the possibility of the DRV having ‘aspirations’ to dominate Laos and Cambodia. In short, Vietnam was a national defense project for China. Because of these two conflicted views of the war, the CCP committed to support North Vietnam though still minimized the probability of fighting with the US army.

During the first years of the war, the DRV regularly consulted with the CCP to achieve the goals of unifying the South and reconstructing itself. So, according to Zhai, from experiences with the Chinese Civil War, reconstruction of its country, and geopolitical interests, the CCP suggested the DRV to “conduct a long-term underground work, accumulate strength, establish contact with the masses, and wait for opportunities”. This suggestion not only provided China a back door to protect itself from any possible confrontation with the US but also carefully displayed solidarity with the DRV, who was important for China to expand their influence but also shared China’s struggle to internationalize their vision of communism.

Surely, the DRV recognized the differences and had suspicion toward the CCP’s intention. Yet they still decided to listen to the advice from the CCP. According to China scholars, the CCP also didn’t hesitate to display its commitment to the DRV. Despite having to rebuild its country at home and despite historical animosities, China devoted lots of resources, including people, to help restructure North Vietnam. Acknowledging that the DRV didn’t have the capabilities to pay back any loans soon, the CCP even initiated customization of their package to Vietnam as military aids, and understood by themselves with the vision that when the situation got stabilized, possible transnational trade would compensate for current risks. Zhai reports that in 1963, the CCP leader Mao Zedong told a DRV delegation that, “… You can pay the Chinese debts whenever you are ready and it is all right even if you do not pay”. High payments come with high expectations so Mao probably only said it to keep the DRV to China’s side in the communist sphere for the time being.

Because northern Vietnam always had to import rice from the south in previous colonial years, China filled in the gap by sending rice as aids to the DRV in addition to irrigation specialists to initiate five irrigation projects to improve the agricultural system. Zhai writes that in 1955, the CCP also “agreed to provide the DRV with a grant of 800 million Chinese yuan (US$200 million) to be used to build eighteen projects, including the Hai Phong cement plant, the Hanoi power station, and the Nam Dinh cotton mill” as well as to send technical experts to assist the DRV and host North Vietnamese to take apprenticeships in Chinese industrial enterprises.

During the first few years of the 1960s, the DRV requested even more assistance from China. The response: China sent a military unit to defend the DRV, a railroad engineering troop to improve the supplies line from Beijing to Hanoi, and other units to construct roads along the coast of North Vietnam as well as via Laos and Cambodia to ensure that the DRV would definitely receive their supplies, writes Zhang Xiaoming in the Journal of Military History 1996. Moreover, China also contributed much to the development of North Vietnam spatially and militarily with the commitment to internationalize its revolution. Mao, who enthusiastically and deeply believed that he could transform the world, was personally so committed to the conditions of Vietnam that he told a DRV general about his view: “Your business is my business and my business is your business”, according to Zhai. The CCP wanted to keep the DRV by its side. However, it also displayed expectation: China would support Vietnam at all costs to fight the US as long as Vietnam also do so for China to expand.

Undeniably, the role of aids only became significant depending on how the recipient countries used them. The role of aids from the US to South Vietnam and China to North Vietnam surely were tremendous, although the amount of especially military aids from the US might have been underestimated while those from China[4] overestimated. Yet those aids were all short-term due to political instability. Between the two Vietnams and within the context of the geopolitics of the region, the US and China simply did not pick a side. The political instability dictated that development was about stabilization and, at least not from the perspective of the DRV, prevention of a breakout war. Each has always carefully observed each other in order to make moves in its respective influencing regions. Because American aids largely benefited those at the top of the South Vietnamese society, others were more likely to develop sympathy toward the Vietnamese communists from the North as well as those secretly living in the South. In addition, literature shows that the role of the GVN was subordinate to order from the US, while the DRV government took more initiatives approaching China and the USSR and manipulating their relationships with each other as well as with the US. With Vietnamization, the CCP commitments, and their determination to fight on a large scale, the DRV had more advantage to later achieve their goals in 1975, when they successfully occupied Saigon, the capital of South Vietnam and renamed it Ho Chi Minh City, forever reminding the city of its fall. However, because of their national pride, their unification victory that dismissed assistance eventually led to the Sino-Vietnam conflict in 1979. The period from 1950s to 1970s was tumultuous for Vietnam and those who involved. Further, the lack of a strong economic foundation in both the North and the South also added to the challenges that a unified Vietnam had to face as a new era came, demanding them to restructure their country.

Ideologies clashed in the Vietnam War. Materially, aids were sent to ensure that the other side of the war would not be able to expand its influence while consolidating one’s power in the region. Stability was the main issue in order to avoid protests and win people. Hence, there were no sound development projects that could outlast the incumbent regime. The US established a proxy government that was too dependent on aids and hence too expensive to keep. China in several ways assisted a regime to maintain a shared ideological causes but North Vietnam was so interested in unification that it decided to mainly concentrate on the battlefield. The development projects that happened during the period from 1950s to 1970s in Vietnam were therefore to prevent a war by building up one that would eventually break out and cost too much human and other resources.



[1] The USSR absolutely also played some significant roles in these events. However, this paper only seeks to clarify the relationships between the U.S., China and the Vietnams.

[2] At this time, the USSR showed interest in a peaceful unification of the Vietnams but they were then more concerned with Eastern Europe. While they left the matters of Vietnam to the Chinese, their relationship with the Chinese became less positive in the coming years. The Sino-Soviet conflict in which the DRV took side with the CCP initially, and later with the Soviet, to achieve the goal of independence and unification complicated the relationships between all sides.

[3] According to Zhai, China saw Korea, Taiwan, and Vietnam as the three fronts that are vulnerable to invasion by the United States and their allies.

[4] For some times, the USSR also sent aids to North Vietnam.


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