Core Viewpoint - Vietnam has actively borrowed from the RMB exchange rate system to enhance the flexibility of the VND exchange rate, allowing for two-way fluctuations in its exchange rate mechanism, which is crucial for strengthening financial cooperation with China and expanding bilateral currency settlement [1][30]. Group 1: Historical Exchange Rate Mechanism - Before 2015, Vietnam maintained a fixed exchange rate system pegged to the USD, experiencing significant depreciation during financial crises, with a cumulative depreciation of over 26% during the Asian financial crisis and 30% during the US subprime mortgage crisis [2][3]. - The exchange rate system was characterized by narrow fluctuations and intermittent large depreciations, despite being classified as a hard peg by the IMF [3][6]. Group 2: Reform and Development of Exchange Rate Mechanism - In 2014-2015, Vietnam initiated reforms to its exchange rate formation mechanism to stabilize the foreign exchange market and support its economic reforms [6][7]. - The official exchange rate was established based on supply and demand in the foreign exchange market, with the State Bank of Vietnam managing the exchange rate through monetary policy tools and market interventions [7][8]. Group 3: Introduction of the Intermediate Rate Mechanism - Following China's "8•11" exchange rate reform in 2015, Vietnam introduced an intermediate rate mechanism for the VND, allowing for a more flexible exchange rate that reflects market conditions and trade relationships [9][10]. - The VND exhibited a "half-following" characteristic to the RMB, where it remained stable against the USD until depreciation pressure accumulated, leading to a quick depreciation [11][15]. Group 4: Two-Way Fluctuation and Increased Flexibility - Since 2020, the VND has achieved two-way fluctuations, allowing for more elastic movements in response to market conditions, with significant depreciation occurring in 2022-2024 [16][25]. - The correlation between the VND and RMB has strengthened, with the VND no longer maintaining stability against the USD during RMB appreciation, but rather following the RMB's movements [25][26]. Group 5: Future Outlook for the VND - The VND has experienced a depreciation trend since February 2025, with a 5.06% depreciation against the USD and approximately 6.85% against the RMB [31][35]. - Key factors influencing the future exchange rate include trade tensions with the US and the Federal Reserve's hawkish stance, which may exert additional pressure on the VND [36][37].