In February, Thai exports to China achieved growth of 3.4 percent YoY for the first time in four months, against a contraction of (-)0.4 percent YoY in January as a result of demand for oil inventory amid Mideast uncertainty. The value of Thai exports to China – excluding refined and crude oil – thus contracted (-)2.6 percent YoY, reflecting that Thai exports to China remain fragile during early 2012 amid the challenges of economic uncertainties and rising competition.
For the 2012 full-year trade balance, Thailand will likely sustain a deficit with China due to our high reliance on imports of Chinese capital goods, raw materials and intermediate products, as well as consumer products and other merchandise in response to economic activity and the Thai government policies, e.g., the ‘One PC Tablet per Child' program.
Also, Thai exports to China over the remainder of this year may not be very active due to the cooling Chinese economy amid shrinking demand in their key trading partners, e.g., the EU and USA. Also, the Chinese authorities have announced a cut in their economic growth target for 2012, down to 7.5 percent, against 8-percent growth in 2011. Spending there may be moderate this year as their government has to cope with challenges in balancing economic sectors, as well as surges in electric power and gas prices.
However, KResearch views that our exports to China this year may maintain positive growth on demand for energy products to support expanded local infrastructure in their planning to upgrade living conditions in rural areas, seeking to raise the quality of life there closer to urban standards. In addition, China may implement some new economic stimuli; the People's Bank of China may enhance liquidity via various channels and issue guidance for commercial banks to provide loans to SMEs, the agricultural sector and rural communities to avoid a hard landing.