Exports to China in January 2014 declined 0.77 percent YoY, while imports from China grew 3.4 percent YoY. As a result, Thailand suffered a trade deficit of USD1.34 billion with the mainland, the highest monthly change in six months. This hefty trade imbalance should be closely monitored, especially after a new record of USD10.49 billion trade deficit was reached in 2013, making the mainland Thailand's largest trading partner, outclassing Japan for the first time in history. It is of note that China may gain its role as our main source of imports in the future. Total bilateral trade between the two countries reached USD64.97 billion – 13.6 percent of our total trade value in 2013 – followed by Japan at 13.2 percent, and then the US and Malaysia, in that order.
Since reductions in almost all import tariffs came into effect between China and ASEAN in 2010 per the ASEAN-China FTA, the Thai market has been flooded with products from China. Our imports from China grew 22.9 percent per year over the last four years. Moreover, Chinese shipments to ASEAN were 16.9 percent of their total in 2013, rising from 8.5 percent in 2003 when the ASEAN-China FTA became effective. Evidently, Chinese goods have garnered rising market shares in all ASEAN countries. However,Thai trade with ASEAN achieved only 4.3 percent of the ASEAN total in 2013, compared to 3.8 percent in 2003.
Thai products will thus face an uphill task domestically in 2014 wherein competition from cheaper Chinese counterparts is set to become even more obvious. Recently, a large China-based electrical appliance manufacturer set up a production base here; smartphones and tablets with the latest features, focusing on all-in-one functions and affordable prices, shipped from China are quickly gaining popularity here. In the ASEAN arena, Thai products have lost some market share to Chinese goods. Thai manufacturers and exporters to ASEAN should therefore expedite adjustments in earnest. These businesses will inevitably be confronted with greater competition after the shift of production bases by some foreign investors out of Thailand to other ASEAN states.
Amid an influx of Chinese goods, ourmain casualties with a pricing disadvantage would include electrical and electronic appliances, textiles and garments, machinery, consumer goods, automobiles and parts, as well as furniture. The latter from China has seen huge demand from consumers since it accommodates rising urbanization within ASEAN.
Therefore, 2014 will be a great challenge for Thai businesses, especially those producing products similar to their Chinese counterparts to serve local and ASEAN markets. To stay afloat, business adjustments will be needed, especially through quality-oriented initiatives.