The growth of Thai exports to China is expected to ease from 33.2% in 2010 to 10-15% this year as measures taken by Beijing to cool the economy and slow inflation take hold, says Kasikorn Research Center.
China last year became Thailand's top export destination, replacing the United States, as it imported 11% of all Thai exports. The value of Thai exports to China rose to a record-breaking US$2.09 billion in December 2010, while the figure for the whole year rose to $21.5 billion, up 33.2% compared with the 28.1% growth of all Thai exports and 21.2% growth to the US.
The Chinese economy grew by an estimated 10.3% in 2010 and expansion by its various industries increased demand for Thai exports such as chemical products, plastic resins, rubber products, machinery and parts.
Industrial products accounted for 72.1% of Thai exports to China and agricultural products 19.5%. Chinese exports to Thailand were worth $24.2 billion, up 42.3% year-on-year, raising bilateral trade value to $45.7 billion but pushing up Thailand's trade deficit to $2.77 billion from $900 million in 2009.
However, overland trade in Thai goods via countries such as Laos and Vietnam showed a surplus for Thailand of 7.62 million baht in 2010, as a result of land route development and a good economic growth of many southern Chinese cities, said K-Research.
China's domestic consumption will remain a major driver of import demand this year as the government will likely focus on income distribution and consumption, while the production sector will continue to want raw and semi-raw materials.
The Chinese economy may slow down due to stricter monetary and fiscal policy, tight controls on some export sectors, less government support for some industries, and a strengthening currency due to inflation.
K-research believes the slowdown may affect certain Thai exports to China such as rubber and rubber products, computers and parts, refined oil and steel. As a result, year-on-year export growth is expected to drop from 33.2% to 10-15% in 2011.
On the plus side, the Beijing government should be able to continue to drive economic expansion to achieve GDP growth of at least 8%. Moreover, it is currently looking to expand trade and investment with Asean countries, with a number of southern Chinese provinces competing to be gateways to Asean, while land transport routes are being developed.
Better Thailand-China roads will benefit a number of Thai products including fuels, rubber, building materials, consumer goods, tropical fruits, processed food and rice.
Kasikorn Research Center expects Thai entrepreneurs to face a number of problems, such as Chinese nationalism and regionalism, issues unique to each local area, language barrier,s lack of distribution channels for imported goods, dominance of local businesses, and complicated regulations of central and regional governments. In addition, they may face heavier competition from Chinese and Asean entrepreneurs.
Therefore, it recommends that the Thai businesses try harder to understand the Chinese market and emphasise how Thai products are different, such as offering tropical fruits with high quality or other products that are unique in design.
(Source: http://www.bangkokpost.com/business/economics/222667/thai-export-success-won-tbe-repeated)
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