Thai exports to China during May slumped (-)16.3 percent, the first double-digit contraction in 2013. This fall is also the lowest in nearly 4 years since the global economic crises in 2008-2009, wherein Chinese manufacturing and exports – as a major global supply chain system – were subsequently inhibited, indirectly impacting our shipments to China, as well. The current situation differs in that China's economic downturn, now being caused by lackluster domestic momentum, has powerful implications toward Thai exports to China, since they are our largest export destination, taking 11.7 percent of our overall exports. It is therefore important that we remain vigilant toward this situation.
China, together with other key markets, has allowed us to maintain constant export growth over recent years. However, Chinese economic indicators this year have begun to show obvious decline, thus having an unavoidable impact on our exports sent there, in concert with slowing Chinese outbound trade. Because of this, manufacturing in China is starting to lose momentum. Its May exports were a major disappointment, growing only 1.0 percent YoY – the lowest in 10 months – as a result of declining orders from abroad. Meanwhile, China's monetary measures since early in 2013 to prevent inflation, as well as to cool an overheating real estate sector, have also been to blame. Affected by these circumstances, Thai shipments to China, supposedly serving manufacturing and consumption there, have suffered a downturn in line with Chinese imports that have plunged to 0.3 percent growth YoY, from 16.8 percent YoY in April.
KResearch is of the view that our exports to China over the rest of 2013 may not be able to escape adverse effect from the Chinese downturn, as the country is now under threat from so many challenges. While global economic risks seem unpredictable, China's fragile economic structure needs some solid improvement to resuscitate economic confidence there. These daunting challenges are threatening Chinese 2H13 performance to an extent that their official growth target is in question. Given that Chinese authorities can achieve a target of 7.5 percent growth, our shipments there should be able to maintain at best 1.0-percent expansion. On the other hand, if they fail to reach their growth targets, our exports to China will likely be in the red, as such.
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