Fragility remains in the Thai-Chinese trade outlook, although August performance had returned to growth of 3.1 percent YoY with a total value of USD2.4 billion on more vigorous economic activity in China. Chinese exports have recently enjoyed buoyancy due to an improving global market that has also bred an increase in orders for our intermediate components/materials such as chemicals, plastic resins and rubber products. Urbanization has also boosted wood product demand for their home construction and decoration. But Thai exports during 8M13 shrank (-)2.9 percent YoY, totaling USD17.43 billion, due to a changing Thai-Chinese export structure.
Estimates for 2013 Thai Exports to China
|
Growth
(%YoY)
|
Value
(USD millions)
|
Base-case
|
-1.0
|
26,600
|
Estimate range
|
-2.5 to +0.5
|
26,200-27,000
|
Source: KResearch, as of October 2013
|
Crucial impediments causing this sluggishness included poor turnover in computers/parts, slumping (-)41.9 percent YoY, since some manufacturers here and there have relocated production to other neighboring countries. The Thai export sector is also faced with a limited import quota on sugar from China and waning rubber prices. These setbacks will likely reduce our exports to China over the remaining months of 2013, despite momentum from a gradual pickup in the Chinese economy and inventory build-up ahead of the yearend festival that may lead more exports from our end.
With that in mind, we at KResearch have revised our Thai-Chinese export forecast, expecting 2013 growth to fall into negative territory at (-)1.0 percent YoY, with the deepest fall perhaps at (-)2.5 percent, or maximum growth at 0.5 percent YoY. A value of around USD26.2-27 billion is projected, with a base-case of USD26.6 billion (our previous estimate was within (-)4.3 percent YoY to 2.3 percent YoY, with a base-case of 0.7 percent).
It will now be essential to watch the shifting Thai-Chinese export structure. This shift is a result of production base relocations by some computer manufacturers, and intensifying competition in the Chinese market, leading to a lower proportion of computer components and parts sent to China in our total exports. Instead, a higher proportion is being seen in other industrial intermediate components/materials as well as some farm produce that Thailand does well in.
The launch of the Shanghai Free Trade Zone (SHFTZ) on September 29, 2013, will bring with it benefits to Thai businesses. New regulations for this free trade zone, effective October 1, 2013, should attract at least more foreign investors into China and offer Thai investors the chance to use Shanghai as a trade strategic center to more effectively distribute merchandise into their market. Other regulations will be revealed in stages over the remainder of 2013.
KResearch believes that changes brought about by China's Twelfth Five-Year Plan for National Economic and Social Development (2011-2015) have become more substantive this year, benefiting some of our exports that are required by those changes. In the near future, we expect that exports from Thailand to China will become more varied, raising our overall export value and creating a healthier export structure. More variety will have a greater role in our trade, rather than having only one or two dominant product categories. This should heighten our potential in the Chinese market over the long term.
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