April Exports to China, 6-Month Highs…Likely to Slow with Chinese Economy (Business Brief No. 3297 Full Ed.)

Thailand's outward trade with China expanded 16.5 percent YoY to USD2.185 billion in April, the highest growth in six months, following meager growth of 1.4 percent YoY in March. However, this hefty growth may only be statistical due to a low base of 2011 when the Japanese natural disasters in April largely disrupted our manufacturing and exports. However, the export outlook may be bleak later on amid decelerating Chinese economic growth. Meanwhile, imports from China were recorded at USD2.89 billion in April, a YoY increase of 20.6 percent, accelerating over the 13.9 percent growth in March, which reflected our higher consumption. As a result, Thailand sustained a trade deficit of USD713.8 million with China for April.

China's 2Q12 economic indicators have exhibited signs of slowdown. In April, their retail sales continued to slow, just as international trade also showed a marked deceleration, with exports expanding only 4.8 percent YoY, and imports growing only 0.4 percent, compared to the 8.8 percent and 5.4 percent in March, respectively. Similarly, industrial production and investment in fixed assets grew at slower rates than the previous month; public consumption was also marginal. FDI dropped for the sixth consecutive month in April, plagued by numerous external risks. Thus, KResearch projects that China's economy may grow below 8 percent YoY in 2Q12, after showing their lowest growth in almost three years at 8.1 percent YoY in 1Q12. As a result, government stimuli are still needed to sustain their economy.

Nonetheless, the Chinese market may remain more resilient to the global economic slowdown than elsewhere. KResearch forecasts that Thai shipments to China in 2012 may show growth of around 10-15 percent, with China remaining our largest export destination for the third successive year. However, it remains to be seen to what extent the government stimuli will boost their economy. Should fragile growth continue in China, our exports may be put into jeopardy, especially amid weakening US economic performance and a deepening recession in the EU.