Thai exports to China in December continued to grow for the fifth consecutive month. In November and December of 2009, shipments recorded tremendous growth of 77 percent and 117 percent, respectively. Thai exports over the entirety of 2009 thus showed a contraction of only (-) 0.4 percent YoY, against (-) 18.2 percent in 1H09. This improvement could be attributed largely to demand for export-oriented production amid foreign market recoveries and continued expansion in Chinese consumption and investment, boosted by the Chinese government's stimulus programs.
In 2010, Thai exports to China will likely have a brighter outlook thanks to the healthy Chinese economic performance in continuation from the 8.7 percent growth in 2009, faring better than the target set by the Chinese government. Domestic demand in China is expected to continue to grow, driven mainly by gradual improvements in Chinese exports. In addition, Chinese demand is expected to receive a boost from the Chinese government's two-year stimulus package valued at USD586 billion for implementation between October 2008 and the end of 2010 to thwart a fragile economic recovery. Import tariff cancellations on products in the ASEAN-China Free Trade Area “Normal Track” list will also prove to be positive for Thai exports to China in 2010.
However, the threat of high inflation and risk of asset bubbles in China as a result of massive credit extension since last year has prompted the Chinese authorities to adopt a tightening monetary policy to forestall rapid surges in product prices that may eventually jeopardize Chinese economic stability. Chinese policymakers are thus expected to maintain a tightening stance, including hikes in their key policy rate. Even though their tightening monetary policy may help cool their overheated economy now flirting with asset bubbles, Chinese consumption and investment may ease, which may also dent imports. As a result, Chinese growth in 2010 may be inhibited by tightening monetary policy and thus fall short of a projected 9.7 percent GDP growth this year. Focus should be on how much and how long their tightening monetary policy will continue this year, which may affect global commodity and forex markets as well as Thai exports to China. Close attention should thus be paid to this matter.
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