The Chinese economy in 2Q12 grew at the slowest pace in three years at 7.6 percent YoY, versus the 8.1 percent YoY growth reported in 1Q12, wherein several economic indicators, including manufacturing, exports and domestic consumption showed that China's roaring economy has begun to gradually cool since early this year. As a result, the world's second largest economy reported GDP growth of just 7.8 percent YoY in 1H12. The positive effects of a series of economic stimuli and softening inflation rates will likely allow China to continue with their accommodative monetary policy stance over the remainder of this year.
As a result, KResearch expects that the Chinese economy will pick up in 2H12, helping sustain their 2012 GDP growth overall at around 8.2 percent YoY. Although that figure would be higher than the 7.5 percent growth they have targeted, it is nevertheless lower than the 9.2 percent pace achieved in 2011, and the lowest growth they have realized in 11 years.
The slowdown in the Chinese economy for the second straight quarter this year is being closely watched by economists, given its significance to the world economy and trade, including that with Thailand. Bilateral trade over 5M12 between Thailand and China remained favorable, though, growing 8.4 percent YoY. Although that figure represented a decline from the 27.6 percent growth achieved in 2011, it remained higher than with other nations, except those within ASEAN. ASEAN and China have now become key destinations for Thai exports this year. In our base-case scenario, we at KResearch expect that Thai exports to China in 2012 will grow perhaps 15 percent, which would be higher than our projection of 10 percent globally. Export items that will perform well in China include computers and related components, chemicals, refined sugar, petroleum products, electrical appliances, aircraft equipment, electric motors and machinery.
Despite global headwinds, China should be able to maintain relatively high economic growth, but close attention should be paid to economic conditions there if their economic stimuli do not yield the desired results because overall economic conditions might then worsen, having already been hurt by the Eurozone debt crisis. Consequently, Thailand's outward trade to China may fall amid some economic weakening also seen in the US amid the devastatingly harmful Eurozone debt crisis.