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30 Jun 2011


May Exports to China: Agro-processing Category Up 67.1% amid Disasters in China (Business Brief No.3135)

Over the past several months, China has been hit by a series of earthquakes, drought, flooding and landslides. Although these manifestations were not as perilous as Japan's devastating triple disaster with a Richter-9 earthquake in March 2011, many areas in China have been adversely affected by the worst drought in 50 years, especially in the central and eastern regions within the Yangtze River basin, while certain parts of southern China have been gripped by flash floods and landslides, causing significant losses to agriculture, freshwater resources and aquacultural facilities in many provinces there.
In addition, significant portions of China's manufacturing industry have not been able to run at full capacities due to power shortages, prompting the authorities to cut electricity supplies to industrial users. As a result, China has had to import more goods in recent months, as seen from their May import figures that jumped 28.4 percent YoY, against the 22 percent YoY pace in April. Thailand's exports to China have also risen steadily with an over-month increase of 21.2 percent in May, with our agro-processing exports increasing a staggering 67.1 percent YoY.

KResearch is of the view that China still has relatively massive capital reserves to support their economic activities and absorb the cost of initiatives to curtail inflation going forward; meanwhile, domestic investment should continue its growth momentum as power shortages will likely ease by the end of this year. As a result, China should be able to maintain economic growth at or higher than the 7 percent targeted in their 12th National Economic and Social Plan (2011-2015). As a result, we at KResearch are maintaining our growth forecast for Thai exports to China in 2011 at 10-15 percent, which would be lower than the 33.2 percent growth recorded in 2010.