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Experts Say China’s Influence over Thailand to Keep Growing

Chinese Premier Li Keqiang (center L) and Thai Prime Minister Prayuth Chan-ocha (center R) attend the signing ceremony of two memoranda of understanding on railway cooperation and farm produce trade cooperation respectively after they met in Bangkok

Chinese Premier Li Keqiang (center L) and Thai Prime Minister Prayuth Chan-ocha (center R) attend the signing ceremony of two memorandum of understanding on railway cooperation and farm produce trade cooperation respectively after they met in Bangkok

 

BANGKOK – The ties between Thailand-China over the next decades will become closer in every way, including trade, investment, tourism and services based on mutual benefit, while China will also play a more significant role throughout the ASEAN region as a key economic supporter, observers say.

Kraisin Vongsurakrai, secretary-general of the Thailand-China Business Council and vice chairman of the Board of Trade of Thailand, said that from now on trade and investment between the two countries would grow significantly. They will see closer co-operation not only under the China-Thailand Free-Trade Agreement but also under the ASEAN-China FTA and the Regional Comprehensive Economic Partnership.

“Relations between Thailand and China will strengthen in all dimensions into the fifth decade of their diplomatic relationship. Thai and Chinese businesspeople will also work together in doing businesses in both nations and in third countries,” Kraisin said.

He believes more trade between Thailand and China will be denominated in the latter’s renminbi currency, better known as the yuan.

Kraisin said the yuan would be used more in regional trading in the near future once it is fully convertible and functioning as an international reserve currency.

He said the ASEAN region would continue to grow in parallel with China, since that country plays many roles in the region’s economic activities including export-import, investment and tourism.

In the past few years, China’s financial sector has become a key supporter for Thailand and other countries in ASEAN, and has encouraged Thailand and the others to support China’s initiative to establish the Asian Infrastructure Investment Bank.

In one instance of Thailand-China collaboration, they will finalise an agreement on building a high-speed railway with total length of 873 kilometers. The first leg will run from Bangkok to Kaeng Khoi in Saraburi province and Map Ta Phut in Chon Buri. The second will link Kaeng Khoi and Nong Khai.

Elsewhere in the region, China and Laos this month signed a memorandum of understanding to strengthen their co-operation in human-resource development. China is also committed to providing financial support to two events in Laos: the 40th anniversary of the founding of the Lao People’s Democratic Republic at the end of this year and the ASEAN Summit in 2016.

According to the Board of Investment of Thailand, China has been this country’s second-largest foreign investor after Japan for the past seven years (2008-2014). The BOI received applications by Chinese investors for 21 projects in 2008, and the total number of projects had reached 74 as of the end of 2014. Of those, the BOI approved 40 projects last year.

Renminbi in Thailand and ASEAN

The combined value of direct investment from China was Bt3.47 billion (S$137,000) in 2008, and had soared to Bt38.2 billion by 2014.

Kraisin said that although the whole ASEAN region had tightened its relationship with China over the years, China-Thailand ties were particularly strong as Beijing sees this country as a key investment and trading base to ASEAN and other third countries.

Sompop Manarungsan, president of the Panyapiwat Institute of Management, said besides Thailand, China would invest more in ASEAN countries, mainly Cambodia, Laos and Myanmar (CLM).

“With the strong ties [with China] and its good basic infrastructure, Thailand will become the bridge linking China’s supply chain to CLM countries,” he said.

Pisanu Riengmahasarn, former deputy permanent secretary of the Commerce Ministry and former Thai Trade Representative to China, said the land-bridge projects linking Thailand and China via the North-South and East-West Economic Corridors would facilitate more trade and investment between China and ASEAN region.

He said more co-operation would be seen in the following decades, particularly in infrastructure development, as well as investment in high-technology industries and value-added manufacturing.

To promote sustainable ties between the two sides, Pisanu advised Thai traders and investors to focus on mutual benefits.

Private ties

Thailand and China can be considered relatives, as one-third of Thais have Chinese blood. Thus many Thai businesspeople are comfortable doing more trade and investment with China, Kraisin said.

He pointed out that as an example of the long-time good relations with China, the Thai-Chinese Chamber of Commerce was set up in 1910, before the establishment of the Thai Chamber of Commerce. The Thai-Chinese Chamber now has more than 500 members.

To promote more trade and investment between the two countries, Kraisin advised Thai businesspeople to cross the language barrier by sending more young Thais to learn Mandarin and promote the teaching of Chinese in Thailand’s schools.

The two governments should also discuss tariff and non-tariff barriers, as despite the FTA with Thailand, China’s provinces still impose high tariffs for some goods. Thai investors should also form joint ventures with Chinese enterprises to facilitate their expansion into that market, particular in newly emerging interior provinces, after many investments in coastal cities.

Businesses that have high potential for Thai investors in China are processed food, alternative energy, and green high-technology industries.

China is one of the largest markets for Thai agricultural exports, mainly rice, tapioca, rubber and fruits. Chinese demand has had a strong influence on the prices of Thai commodities during the past several years.

To promote more exports to China, Sompop advised Thai traders to focus more on the emerging middle-income group and the rising number of aging people.

“Chinese consumer behavior and lifestyles have been changing. With more income, Chinese consumers will have high demand for goods, more beauty products, and food safety, while they will also be concerned about the environment,” he said.

Within five years, 60 per cent of China’s people will be living in the cities. Within two years, China will also become an ageing society, 240 million of its people will be over 60 years old, Sompop said. Thus Thai traders should consider penetrating those markets.

The Commerce Ministry reports that between 1991 and 2014, two-way trade between Thailand and China rose by 43 times from US$1.48 billion to $63.58 billion. Exports from Thailand grew from only $340,000 in 1991 to $25.08 billion, while imports jumped from $1.15 billion to $38.5 billion during the past 23 years.

In the first four months of this year, exports from Thailand to China declined 11 per cent year-on-year to $7.45 billion, while imports from China were up 10.7 per cent to $12.98 billion.

Major trading partner

China has been Thailand’s largest export destination since 2010, and the Kingdom’s largest import source since 2014. Two-way trade between Thailand and China in 1991 accounted for 2.25 per cent of this country’s global trade value. That figure had risen to 13.96 per cent as of 2014.

As well, the number of Chinese tourists visiting Thailand has risen significantly during the past seven years. In 2010, 1.13 million Chinese tourists visited Thailand, 2.8 million in 2012, 4.64 million in 2013, and 4.62 million in 2014. This year, the number of Chinese traveling to Thailand is expected to reach 5 million.

More Thai tourists are also expected to visit China, from about 700,000 last year to 1 million this year.

This is the first installment of a series commemorating the 40th anniversary of diplomatic relations between Thailand and China. The second installment will run this week.

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