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7 Dec 2022


First anniversary of China-Lao PDR railway offers another export channel via Thailand’s borders to promising areas in China (Current Issue No.3369)


        During 10M22, Thai exports in Baht to China grew at a slower rate of 2.8 percent while Thailand’s cross-border shipments to China contracted 27.3 percent YoY to THB126 billion. Nevertheless, Thailand’s cross-border exports to China via several modes, particularly land and rail transportation (China-Lao PDR railway that has been fully operational since December 3, 2021), recorded substantial growth. As a result, cross-border freight transportation shows bright prospects ahead, as follows:
  • Cross-border land transport has grown in popularity as it offers another option in helping distribute goods to China aside from marine transportation, which is a major mode for exporting Thai products to China. During the COVID-19 pandemic, cross-border land transportation served as an important channel for the distribution of products to China. The proportion of Thai goods exported to China via this channel surged to 17 percent of the total value of exports to China (up from 12.4 percent in 2019).
  • Strengths of cross-border land transportation between Thailand and China include the fact that there are four routes for sending goods from Bangkok to China, and they typically take only 2-5 days. Cross-border freight transport between the two countries will be boosted further when the fifth route, i.e., the  5th Thailand-Lao PDR Friendship Bridge connecting Bolikhamxay in Lao PDR and Bueng Kan in Thailand, is completed in 2024, as it will help enhance transportation flexibility and time. It is expected that the value of Thai exports to China will increase by at least THB1 billion during the first year following the completion of this bridge.   
  • Potential purchasing power is seen in southern China as Yunnan and the Guangxi Zhuang Autonomous Region exhibit promising prospects ahead. Despite a contraction in Thailand’s cross-border exports to China overall during January-October 2022, such shipments to southern China continued to thrive. Cross-border exports to Yunnan via the 4th Thai-Lao PDR Friendship Bridge in Chiang Rai have surged 27.9 percent YoY. Such shipments via the China-Lao PDR high-speed rail, which has been operational for just over a year, have gradually increased to THB1,569 million, amounting to 1.3 percent of Thailand’s total exports to China.  
  • Thai products sent to China via border checkpoints in Southern China can be distributed quickly to areas in the central and western regions of China, thanks to their efficient logistics networks, especially  products that cannot be produced in China and those that are unique of Thailand (such products have already received good response there), plus intermediate goods for further manufacturing in Chongqing and Chengdu, which serves as a logistic hub for Inner China. These Chinese provinces have logistic links with Europe, as well.  
        However, due to the impact of China's stringent lockdown restrictions seen early this year, the global economic downturn and high base of Thai exports to China in 2021, we at KResearch expect Thailand’s cross-border exports to China will report a contraction of 25 percent at THB145 billion in 2022 despite increased purchasing power during the year-end festive season. Looking ahead, close attention must be paid to China’s guidelines to relax its zero-COVID policy (positive signs have been seen in the government’s actions so far) and economic restructuring plans, with greater emphasis placed on domestic consumption). Although the overall exports to China look relatively bleak, increased distribution of Thai products to southern China via our northern and northeastern borders will offer greater opportunity for Thai exports in new economic zones within Inner China, particularly consumer products, which amount to almost 60 percent of Thailand’s cross-border shipments to China. Most of these Thai exports to China are unique such as processed food, fresh fruit, snacks, cosmetics, herbs, consumer products, processed wood, Halal food (given ample market opportunities in western China, thanks to a majority of its Muslim population). Intermediate products amount to 40 percent of Thailand’s cross-border exports to China. They include electronics, unfinished products that primarily use important raw materials produced in Thailand such as para rubber and plastic pallets. These products have the potential to meet manufacturing demand in China’s thriving industrial zones in the central region ahead.