Thai Exports to China have been hit hard by the weakening demand in the world market and unstable economic recovery lessening demand for China's exports in the international marketplace. Hence, China's exports during July showed a higher contraction against the decelerating contraction in June, so China's import demand for industrial goods dropped. Thus, Thai exports that serve their production sector also fell.
Thai exports to China during July posted a high contraction of 21.6 percent YoY, against the decelerating contraction in June of 3.5 percent. It was obvious that Thai exports to China had contracted more in July, even after contractions had decelerated for five consecutive months (February to June). Moreover, July exports had shrunk 6.4 percent MoM, which was the first contraction after showing growth for five consecutive months. Nevertheless, our export value to China in July was higher than in other months, except in June that was higher still.
Other factors inducing that contraction during July included a high base effect against July 2008, which had the highest export value of 2008 with USD1.665 billion, compared to the average export value over the first six months of 2008 at about USD 1.4 billion. Also a factor in the drop would have been China's industrial production earlier increases in imports later balancing out and causing the contraction in July, as China's business sector might reduced their purchase orders due to the need for fewer imports. Their inventories had decreased during the severe economic crisis in 4Q08, which had caused the Chinese economy to suffer a deep deceleration in 1Q09, but then improved in 2Q09, spurring purchase orders and raising inventories.
However, China's exports should improve over the remainder of 2009 in line with the recoveries in the USA, EU and Japan that are reporting satisfactory economic figures. Japan's economy had their best growth of 0.9 percent in 2Q09 (QoQ), against contractions in the previous four quarters. Meanwhile, the economies of the USA and EU have also improved with -1.0 and -0.1 percent QoQ respectively, versus the -6.4 and -2.5 percent drops in 1Q09. This reflects a bottoming within the G3 economies where it is expected that they will improve gradually. This positive signal will help boost Chinese exports to G3 countries, key export markets for them.
In addition, other supporting factors for the Chinese economy include their stimuli that include liquidity injections and other assistance measures to help the growth of China's consumption and investment. All of these factors will help increase demand for imports that will also help boost our exports to China over the remainder of the year, particularly during the last two months when growth may resume versus the low base effect of exports to China in the last two months of 2008.
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