UOB predicts Chinese uptick

Chinese direct investment into Thailand will continue to pick up, supported by current infrastructure investment and Xi Jinping’s Belt and Road initiative, says United Oversea Bank (UOB).

China’s foreign direct investment (FDI) in Asean reached US$62 billion (2.1 trillion baht) at the end of 2015. That figure is forecast to increase following massive investment in infrastructure projects by China in the region, said Sam Cheong, managing director and head of UOB Group FDI Advisory Unit.

Half of that $62 billion in FDI was captured by Singapore, while more FDI has been pouring into countries like Indonesia, Myanmar and Malaysia.

“Tha i land captures 5% of Chinese FDI into the region or $3-4 billion,” said Mr Cheong.

FDI flows into Asean average $120-130 billion every year. That amount is expected to keep rising, given the large population of the region.

He said that Chinese FDI in Singapore created spillovers for other countries in the region.

For the first three months of this year, UOB Group’s FDI Advisory Unit facilitated more than 2.7 billion baht of Chinese investment in Thailand — over 40% higher than the total for all of 2016.

Sect o rs that attracted such FDI incl u de consumer goods and services, natural resources, automotive and info-communication.

“I think Chinese direct investment into Thailand will pick up over time once there’s improvement in terms of connectivity between Thailand and China,” said Mr Cheong. He said the jump in UOB’s business volume serves as a good indicator.

He said the Belt and Road initiative is expected to be a game changer as it will alter trade flows as well as the supply chain landscape in Asia.

“As the Belt and Road continues to roll out, the connectivity in the Southeast Asia via the maritime Silk Road will be enhanced and improved as well as trade flows over time,” said Mr Cheong. “Thailand is reacting now to changing global trends by developing the Eastern Economic Corridor; a great plan that can be complimented very well.”

He said there are also more Chinese investors seeking to use Thailand as a production hub supported by the country’s strategic location, enhanced connectivity and more infrastructure development.

Improvements in connectivity, including hard infrastructure like roads and rails, are required to attract more FDI. But soft infrastructure such as digital connectivity also needs to be improved as it is very important in supporting new industries, he said.

The UOB Group FDI Advisory Unit was established in 2011 to help support its customers expanding their businesses out of their local markets.

The units are located in China, Hong Kong, India, Indonesia, Malaysia, Myanmar, Singapore, Thailand and Vietnam.