Thailand's outbound trade to China during 5M10 jumped 53.2 percent, driven by hefty export growth of 70 percent in 1Q10. It is expected, however, that our exports to China will have begun to slow in 2Q10, despite a rebound in our shipments to China in May that grew 39 percent YoY, beating the 27 percent growth YoY in April, due to increased demand in China for re-export.
The expected decline in our exports to China in the months ahead would likely be consistent with the slowing trend in the Chinese economy beginning in 2Q10 (after registering impressive growth of 11.9 percent YoY in 1Q10) amid risks to the global economy, particularly the sovereign debt crisis in Europe that, if prolonged, will deal a blow to Chinese exports. This, in turn, would adversely affect our exports to China, as well, especially our intermediate goods used in industrial production there. In addition, an expected economic slowdown in China as a result of government's additional measures to prevent an overheated economy via policy rate hikes and other steps will weaken their imports further.
Meanwhile, the Chinese government announced on June 19 that they would increase the flexibility of their Yuan (CNY) exchange rate by resuming a policy of gradual appreciation of the CNY against the US Dollar (USD), but would not undertake aggressive appreciation or revaluation in order to safeguard their export sector. In any case, it is expected that China's exports will be undermined somewhat by the appreciating CNY as product prices rise on its higher value. As a result, their import needs from Thailand (for re-export) will decline, but our exports will become more price competitive versus theirs. Meanwhile, as Chinese households gain greater purchasing power as a result of the Yuan's appreciation, this would open greater opportunities for our exports to serve increased consumer demand there. It is expected that our exports to China will continue to grow in 2H10, albeit slower than the 50 percent growth projected for 1H10.
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