Thailand's exports to China in 2010 will benefit from tariff reductions on normal track goods per the ASEAN-China FTA to duty-free status on January 1, 2010, and the important driving force of the Chinese economy recovery toward a more stabilized global economy. The growth of the Chinese economy is now being shifted significantly toward domestic demand due to softening consumption in overseas markets. Thus the Chinese authorities are continuing to use proactive fiscal policies to spur consumption and investment in 2010. In the long run, it is expected that domestic demand will have a more significant role toward Chinese economic growth.
In time, internal demand must become more significant to Chinese growth, as their export sector is facing changing consumer behavior in developed countries, particularly in the US, where they are turning toward to saving more, thus spending less, and that is weakening demand for China's export sector to fulfill. The Chinese economy is now focusing on domestic demand in urban areas and the development of rural areas deep into the inner precincts. Their potential to grow is expected to be an important consumption base for China in the future.
Moreover, Chinese are becoming more affluent, so their shopping behavior and consumption levels are changing as they will look toward greater convenience and focus on better quality. The price factor is becoming less important; this will be favorable to broader product selections for middle- and high-income earners as time passes.
The potential for Thai exports to benefit from China's duty-free import tariff liberalization in January 2010 is expected to support China's growing consumption demand, where food and beverages such as fruit juices (grape juice), personal items such as bags, leather products, garments and other textiles, gems and other jewelry, furniture, cosmetics and perfume are expected to become more popular. Investments into their service sector will apparently become easier as we enter China's second phase of service liberalization that covers a wider range of service fields. At present that is in the negotiating stage, but is expected to be concluded and enforced by 2010.
Opportunities for Thai service businesses in China would include the fields of hotels, spas and Thai massage centers, restaurants, hospitals and specialized clinics, day care centers and occupational education. Meanwhile, it is quite possible that China will increase their investments in Thailand-based service businesses, including construction, banking, hotels, health service centers, and spas, as well as manufacturing production of processed agricultural products, food and beverages, automobiles, alternative energy technology, tapioca and rubber products.
However, Thai businesses may face stiff competition from other ASEAN countries in the Chinese market because they also get the same benefits on goods and service liberalization, like Thailand. This rivalry will get even tougher at home due to Thailand's obligation to open our market to China, as well, in electrical equipment, furniture, clothing and jewelry. However, despite the fact that Thailand's exports to China will be eligible for duty-free status, Thai goods are subject to many other barriers, e.g., China's local taxation, particularly a high VAT, plus certain other fees and strict regulations on the quality standards of imported goods, particularly electrical equipment and food. Thai service business may also face the problem of strict internal rules on service businesses and worker standards.
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