Thailand's outward trade to China remained robust in August, growing at a staggering 50.1 percent YoY, to USD2.7 billion. That figure translated into a 12.5 percent share of Thailand's total exports, meaning that China was the largest export destination for the Kingdom. Such impressive growth was attributable to growing demand in China, spurred by steadily increases in per capital income and their government's policy of promoting fair distribution of income and consumer spending.
China's plans to accelerate intermediary component imports due to dwindling inventories and higher commodity prices as compared to last year have also prompted many Thai exporters to increase trade with Chinese counterparts amid the risk of a double-dip recession in the US and EU. That move would help avert any adverse impact on their exports if the US and EU, which constitute a combined 20-percent share of Thai exports, slip back into recession. In addition, because it will likely take some time for Japan to recover economically, many Thai exporters, who were largely dependent on Japan, the US and Europe, are now shifting to new markets – especially China – to offset export shortfalls.
China, the world's most populous nation, will continue to offer huge potential for Thai exports, as their economic performance shows better signs than the three other major economies. China's 12th Economic and Social Development Plan that focuses on bolstering trade with ASEAN member nations should benefit Thai exports as well.
However, uncertainties in the global economy, an inflationary spiral in China and volatility seen in the prices of key food products and commodities in global markets may inhibit China to further boost the economy via fiscal and monetary policies ahead. This, in turn, may cause Chinese consumers to tighten their spending, thus slowing economic activity there this year. Given this, KResearch expects that Thailand's exports to China will probably grow in a range of 22-27 percent overall for 2011.