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13 Dec 2022

Econ Digest

The first anniversary of the Laos-China Railway…More options for Thailand-China cross border trade


        Overall Thai exports to China in THB terms during the first 10 months of 2022 grew slowly at 2.8%, while Thai cross-border exports to China contracted 27.3%YoY to THB126 billion in the same period. However, cross-border exports via some routes are still expanding noticeably, especially via trucking and to Yunnan Province via the Laos-China railway that has been operating for 1 year since December 3, 2021. Cross-border transport still shows signs of growth in the future, as follows:

    • Cross-border transport has become an important contributor to shipments to China during the COVID-19 outbreaks; the proportion has rapidly increased to 17% of total exports to China from all channels in 2021 (from 12.4% in 2019).
    • At present, there are 4 cross-border transport routes between Thailand and China, which take only 2-5 days to transport goods from Bangkok to China, and these routes will become more active after the opening of the fifth transport route. 
    • Purchasing power of the population in Yunnan Province and Guangxi Zhuang Autonomous Region in southern China shows room for growth in future. Currently, Thai exports to southern China grew in contrast to the contraction seen in the total cross-border exports from Thailand to China. Exports to Yunnan Province via the fourth Thai-Lao Friendship Bridge in Chiang Rai Province expanded by 27.9%YoY, which is the same as the Laos-China high-speed railway channel that has recorded a steady increase in trade value in its 1st year of operation at THB1.569 billion, initially accounting for 1.3% of total cross-border exports to China. Products that have become new noteworthy exports are fruits, cosmetics, chili seasoning, curry paste, cassava, nuts, home accessories and computer equipment. 
    • Thanks to China’s efficient logistics network, products exported through a cross-border transport channel from Thailand to Southern China can be quickly delivered to central and western China. In particular, consumer products with Thai characteristics that cannot be produced in China, as well as intermediate products that use important Thai raw materials like rubber and plastic pallets, can also be processed in Chongqing and Chengdu. These two cities serve as transportation hubs in the inner areas, connecting the whole of China and linking the transportation of goods to Europe.

        However, given China’s strict lockdown measures at the beginning of the year, the global economic slowdown and the high export base in the previous year, KResearch projects that Thailand’s cross-border exports to China in 2022 may shrink by 25% or be worth THB145 billion. While Thailand’s cross-border exports to China during the remainder of 2022 will be boosted by purchasing power during the year-end festive season, the overall exports have previously come under pressure. 

        Going forward, an eye should be kept on the easing of zero-COVID policy that has begun showing positive signs, and China’s economic restructuring plan that will see a shift to greater reliance on domestic consumption. Amid a gloomy outlook for the overall exports to China, diversifying transport modes along cross-border trade routes in northern and northeast Thailand for exports to southern China should be another channel to provide opportunities for more exports of Thai products to the new economic areas in China.

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