Analysts said China's commitment to liberalise and embrace competition -combined with the region's general economic recovery - highlighted howunappealing communist Vietnam's inefficient and high-cost economy was toinvestors.

But few agreed on how Vietnam would react to Monday's agreement that pavesthe way for China to join the World Trade Organisation, which sets globaltrade rules.

Some financial sources said Vietnam would take heart that neighbouringChina, a socialist ally despite their long history of animosity, had gonethe final yards with the United States on WTO.

Others said Vietnam had its own agenda, which focussed primarily on a groupof ageing Communist party leaders trying to reconcile the risk to one partycontrol that opening up to the world economy and embracing competition wouldbring.

After maintaining near silence for months, last week Hanoi said it wantedmore talks with former enemy, the United States, on their trade pact whichwas agreed in principle last July.

Foreign investors who took those comments at face value said the immediatefuture of the agreement looked bleak, but other financial sources have saidHanoi was still keen to resolve the issue over the next two or three months.Pham Chi Lan, executive vice-president of the Vietnam Chamber of Commerceand Industry, said local firms were always worried about the competitivethreat posed by China. But since Beijing's WTO deal, that fear hadheightened.

"Of course China's move will affect us. Besides being a tougher competitorfor exports, China will be very competitive in attracting foreigninvestment," Lan told Reuters.

Lan said Vietnam should use the China deal as a spur to enhance itscompetitiveness and accelerate integration with the world economy.

Jean-Pierre Verbiest, resident representative of the Asian Development Bank(ADB) in Hanoi, said the China deal put Vietnam in danger of falling furtherbehind other Asian economies over the medium term.