The slowing Chinese economy, encumbered by the global economic downturn, has inevitably hurt Thai outward trade to China. A steep contraction was seen in Thai products sent to Chinese manufacturing supply chains that focus on re-export to the EU. This picture became clearer in August when our exports to China plummeted 12.9 percent YoY to USD2.3 billion, whereas our imports from China rose 8.9 percent YoY to USD3.3 billion, translating into a trade deficit of USD939 million. On the 4Q12 outlook, it is expected that the value of Thai shipments to China may not return to normal yet, despite a low 2011 base as a result of flooding then.
Given this, we at KResearch project that exports to China over 2012 will grow perhaps 5 percent, before picking up next year as their economy should rebound on economic stimuli. We expect that it will expand around 8.1 percent in 2013, bettering the 13-year low of 7.8 percent estimated for this year.
China can potentially help revive Thai exports and those of other ASEAN nations because it is the largest export destination for ASEAN. Vice versa, ASEAN can help sustain the Chinese export sector, too, particularly now that it has become quite sluggish despite the government economic stimuli that are helping bolster the country's manufacturing sector and trade. This was seen in August when Chinese exports slowed to 2.7 percent growth YoY, though shipments to ASEAN grew substantially by 10.3 percent YoY in August, and 15.5 percent YoY over 8M12. Currently, ASEAN is the fourth largest export destination for China, taking 9.0 percent of China's total international trade, compared to 7.8 percent for Japan; hence, ASEAN is reasonably important to China economically. At the same time, China is an important source of low-cost imports for ASEAN, given the significant volumes bought by Myanmar, Vietnam, Indonesia and Thailand to meet consumer needs and support manufacturing in those nations.
Within ASEAN, Thailand is China's second most important trade partner in terms of both exports and imports. Thailand is the second largest import source for China, after Malaysia. Although China's imports from ASEAN members are nearly in the same categories, Thai products have the highest potential of ASEAN peers. Amid competition from other ASEAN nations in China, Thailand should focus on maintaining our share of such products sent there as machinery, electrical appliances, electronics and chemicals by improving our quality to meet the needs of Chinese consumers. On agricultural exports, e.g., rubber and cassava, we should maintain our share of the Chinese market, but need to add value to them. Thai exporters will need to heed China's new non-tariff measures concerning environmental impact and product standards.
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