The Problem of Financialization in a Weak Economy: A Vietnamese Perspective

In recent years, Vietnam has experienced rapid economic growth, rising incomes, and increasing integration into the global economy. However, beneath this progress lies a structural concern that is often overlooked the growing financialization of the economy. While financial development is a natural part of modernization, excessive financialization especially in a relatively weak or developing economy can distort incentives, misallocate resources, and ultimately slow down long term growth.

Financialization refers to the increasing dominance of financial activities such as trading, lending, and asset speculation over real economic production. In a healthy economy, finance plays a supporting role. It allocates capital efficiently to productive sectors like manufacturing, infrastructure, and innovation. But when financial activities begin to overshadow real production, the system becomes imbalanced.

In Vietnam, this imbalance is particularly visible in the flow of capital into real estate and short term financial opportunities. Instead of investing in factories, technology, or supply chain improvements, a significant portion of capital is directed toward land speculation and asset trading. These activities often provide faster and more predictable returns, especially in an environment where real business operations face regulatory complexity, execution challenges, and lower margins.

This shift has several consequences. First, it leads to a misallocation of resources. Capital that should be building long term productive capacity is instead locked in non productive assets. As a result, productivity growth slows, and the economy becomes more fragile. Second, it distorts the allocation of talent. Highly capable individuals are drawn into finance, brokerage, or speculative ventures, rather than engineering, manufacturing, or deep technology areas that are critical for long term national competitiveness.

Another consequence is the creation of a false sense of wealth. Rising asset prices particularly in real estate can make both individuals and companies appear wealthier. However, this wealth is often not backed by corresponding increases in productivity or income. When asset values are disconnected from real economic fundamentals, the system becomes vulnerable to corrections, which can have widespread economic and social consequences.

Financialization also exacerbates inequality. Those who own assets benefit disproportionately from rising prices, while those who rely on wages fall behind. Over time, this creates social tension and reduces economic mobility, undermining the inclusiveness of growth.

It is important to recognize that financialization in Vietnam is not the root problem, but rather a symptom of deeper structural issues. These include the relative difficulty of building and scaling real businesses, regulatory inefficiencies, and a broader short term mindset among both investors and operators. In such an environment, capital naturally flows toward opportunities that offer quicker and more certain returns, even if they do not contribute to long term economic development.

For a country like Vietnam, which is still in the process of building its industrial base, this trend is particularly concerning. The focus should be on strengthening manufacturing capabilities, improving infrastructure, and fostering innovation. These are the foundations of sustainable growth and global competitiveness. Excessive financialization, however, diverts attention and resources away from these priorities.

That said, this imbalance also creates opportunity. In an environment where many actors are focused on short term financial gains, there is less competition in sectors that require long term commitment and operational excellence. Companies that choose to build real value through improving supply chains, developing technology, or creating industrial capacity can establish strong and defensible positions.

Ultimately, the challenge is not to eliminate finance, but to restore its proper role as a facilitator of real economic activity. This requires both policy direction and a shift in mindset among business leaders and investors. Sustainable growth comes not from speculation, but from building things that create real value over time.

Vietnam stands at an important crossroads. The choices made today between short term financial gains and long term productive investment will shape the country’s economic trajectory for decades to come.