Although the Chinese economy in 2009 may not be as healthy as it was in 2008, it should show growth, thanks to a boost from the government's economic stimuli (implemented November 2008) that has revived their domestic economic and industrial sectors. The stimuli have also helped spur such Thai exports to China as rubber, cassava, computers/accessories and parts, electrical appliances, printed circuit boards and printed circuit board sub-assemblies. In May, Thai exports to China posted a show contraction for the fourth consecutive month. KASIKORN RESEARCH CENTER (KResearch) expects that Thai exports to China in 2H09 will improve, with projected growth of 5-15 percent due to the low base effect of exports to China in 4Q08 at -24 percent. Also, Thai exports to China in 4Q09 might post growth because the world economy has tended toward improvement by the end of this year. Nonetheless, Thai exports to China in 1H09 are projected to have contracted 20 percent. (Thai exports to China in the first-five months of 2009 shrank 23 percent.) As a result, the figure for 2009 overall will likely post a contraction of 3-8 percent, against the 2008 growth of 9 percent.
Thai-China trade will be boosted by the ASEAN-China FTA, because the six founding ASEAN members (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) are required with China to reduce tariffs to duty-free status in 2010 for 90-percent of the goods traded among them. This will help spur Thai exports to China and reduce the costs of import goods from China, too. Currently, China is our second largest import origin, after Japan. The majority of items imported from China are capital goods and raw materials or intermediate goods. Import tariff reductions per the ASEAN-China FTA will help reduce the import costs on these goods, which will help reduce production costs.
China's investments in Thailand during the first five months of this year also improved, rising 161 percent, with a value of THB459.6 million, against THB176 million last year. Looking ahead, that figure will likely increase further this year, thanks to the Chinese economic recovery. Their economic stimuli have helped expand their industrial and investment sectors, resulting in increasingly business confidence. Liquidity within the Chinese business sector has also improved due to the government's easing monetary measures, thus helping boost investment. This, in turn, will prompt China to increase their imports of raw materials, intermediate and capital goods from Thailand, or invest in the production of raw materials and intermediate goods here for re-export to serve the growing demand of their industrial sector. Currently, China has a policy of promoting investments in foreign countries, particularly in the energy sector, to enhance their energy security and agro-industrial sector, including the cultivation of energy crops. Thailand, as a major farming nation, should serve such Chinese investors well.
In addition, there are many supporting factors to attract Chinese businesses to Thailand and ASEAN, such as tariff benefits per the ASEAN-Chinese FTA pact. For example, China will enjoy lower tariffs on raw materials, intermediate and capital goods (that are produced in Thailand and exported back to China).
In addition, the service agreement portion of the ASEAN-China FTA (first package), went into effect after signing in January 2007, and help increase investments in many service businesses among ASEAN members, including Thailand and China. Meanwhile, the investment pact, which ASEAN and China are scheduled to sign in 2009, is set to help promote and protect investments, thus will help create more confidence for ASEAN and Chinese investors toward mutual investments.
The Thai political domestic unrest that should subside further over the remainder of the year will help restore the confidence of foreign investors, including the Chinese, toward investing in our country. Furthermore, if the magnitude of the spread of H1N1 influenza remains under control and the world economy shows a stable recovery, the number of foreign tourists, including Chinese, visiting Thailand will likely increase in 4Q09.
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