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6 Sep 2012

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Thai Exports to China: Down 7.5% in July, Growth in 2012 Expected at 6-10% (Business Brief No.3344 Full Ed.)

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Thailand's outward trade to China fell 7.5 percent YoY to USD2.247 billion in July, the first decline so far this year, versus the 3.1 percent YoY growth recorded in June. Meanwhile, imports from China grew 19.4 percent YoY to USD3.223 billion, translating into a deficit of USD976 million. This decline has triggered concern toward the prospects of Thai exports over the rest of this year, because our international trade is relatively dependent on China, serving as a key driver for Thai exports even during the global economic downturn last year. This situation clearly signals that the Chinese economy is continuing to cool, given the steepest fall of their GDP growth in three years to 7.8 percent in 1H12 amid sluggish industrial production, investment, trade and lending there. China's export performance was no exception, growing less than expected at only 1.0 percent YoY in July. Even though Thai exports to China in 7M12 grew 5.1 percent YoY, being better than to most other export destinations (except to ASEAN), it is still far less than expected.
Due to that surprisingly low growth in Thai exports to China during 7M12, we at KResearch have trimmed our growth projection for Thai exports to China this year down to perhaps only 6-10 percent, against the 10-15 percent forecast previously. A major factor that will significantly affect our trade with China this quarter will be a deeper impact from Europe's sovereign debt turmoil as the EU is still struggling to find a credible solution to the debt crisis.

Given that indirect effect, Thailand may suffer steep declines in certain export categories to our largest export destination, China. This will be especially vexing for those serving supply chains and production bases within China and Europe. Among the affected product categories will be machinery, electrical equipment, non-knitted clothing, plastic and plastic products, rubber and rubber products. However, it is believed that Thai consumer product exports to China may not be affected as much.

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