Thailand's exports to China recorded high growth of 84.4 percent YoY during 2M10. As a result, China outstripped the US as our largest export market, accounting for 11.5 percent of our total exports during the period, up from 9.6 percent in 2007. Major export items showing high growth included electronics, rubber & rubber products and tapioca products. Our shipments to China over the remainder of this year are likely to continue a promising trend in line with China's high economic performance and thanks to market liberalization via the China-ASEAN FTA where NT (normal track) products became duty-free at the beginning of the year. Nonetheless, exports growth to China may dwindle in 2H10, especially in 4Q10 due to a high base effect from 2009 when our exports to China improved significantly over the trough seen in 1Q09.
Amid the tightening monetary policy recently adopted by the Chinese policymakers, as well as their implementation of more stringent regulations over their real estate sector to control possible asset bubbles and inflationary pressure, China's slowing consumption and investment may result in softer demand for imports, including shipments from Thailand. The slowing Chinese economy may also affect global commodity prices and cause forex fluctuations. However, their cooling economy may help stabilize growth, going forward.
Thai exports may continue to receive a boost from accommodative Chinese fiscal policy via both government spending and tax incentives to stimulate the economy. China's consumption and investment may thus continue to grow in 2010, which would be key drivers for export growth in Asia, including Thailand. Thai exports to China are therefore expected to expand over 40 percent during 1H10 before decelerating in 2H10, putting the full-year growth in 2010 at over 20 percent, against the 0.4 percent contraction in 2009.
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