In 2008, it is projected that the USA, which is the second largest export market for China, will be hit hard by their sub-prime mortgage crisis, and that this would thus decelerate the US economy and affect China's exports. However, KASIKORN RESEARCH CENTER (KResearch) forecasts that despite the impact of decelerating exports to the US, China's exports in 2008 shouldn't be as largely affected as they were last year (2007). Exports account for only 37 percent of China's GDP, which is substantially lower than Thailand; we are highly dependent upon exports for 62 percent of our GDP. Given the fact that China's exports to the US account for only 7.2 percent of their GDP, possible economic impacts on China from the US sub-prime mortgage crisis will likely be limited. In addition, the Chinese government has undertaken a policy of stimulating household consumption, which, to a certain degree, may offset risk from dependence on exports. Beyond this, China will also benefit from their role as the host of the upcoming 2008 Olympics, which will draw more money into the country and stimulate China's economy. At present, China' international reserves are top ranked in the world so China has the leeway to choose from many alternatives for more expansionary fiscal policy; for example, the Chinese government can increase domestic investment, if necessary, to stimulate their economy.
The sub-prime mortgage problem will cause US economic growth to falter and likely achieve lower than earlier expected performance; this will cause Thai exports to become sluggish. The National Economic and Social Development Board (NESDB) has projected that Thai exports in 2008 will trend lower than 2007. KResearch is of the view that the US sub-prime mortgage risk will affect Thai exports to this market. China will thus acquire a greater role in driving Thai exports in 2008 because demand in China is high due to their economic expansion and the fact that the government of China has implemented a policy to promote domestic consumption. As a result of that, China has to import more raw materials, such as rubber, fuel, plastic pellets, cassava, etc. Besides this, bad weather in China during 2007 will force China to import more commodities in order to compensate for damage caused by natural disasters. This offers Thailand the opportunity to export such agricultural products as rice, fresh and dried fruit, seafood etc. Hence, China, now the third-largest export market for Thailand (after the USA and Japan), will become a main driving force for Thailand's exports in the coming year.
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