Looming giant catches a cold
Overreliance on the China market poses a host of risks, write Post reporters
From selfie-obsessed tourists to massive bilateral trade and property investment, China’s presence in Thailand cannot be overlooked. The interconnectedness between the economies of Thailand and China rose more than 10 times between 1985 and 2013, with bilateral trade, investment and tourism identified as the main beneficiaries from higher interconnectedness, according to the Thailand Development Research Institute (TDRI).
“If China catches a cold, Thailand will also catch the same bug,” said TDRI president Somkiat Tangkitvanich. “Many Thai businesses have been relying on Chinese [capital]. Too much dependence will put Thailand at risk.”
Among several real sectors of the Thai economy, property is visibly highlighted as one of the much-publicised segments when it comes to identifying Chinese investment in Thailand.
Relatively low condo prices and good returns dated a few years ago prompted Chinese buyers’ appetite to purchase condo units in Thailand.
But things have taken a turn as buyers from mainland China have slowed their condo purchases in Bangkok due to the US-China trade dispute, the strong baht, overpriced units and a supply glut.
Buyers from China and Hong Kong make up about 40% of total foreign purchases of Thai condo units. This means that the local property sector will feel the pinch if Chinese buyers do not make down payments because of a slowdown in China’s economy, Mr Somkiat said.
“Businesses that have been heavily depending on Chinese [capital] will need to formulate their Plan B by diversifying into new customers from Asean and other countries,” he said. “This plan will help businesses to be prepared and prevent a hiccup in doing business and development in case China’s economy experiences a problem.”
CONTROLLED STAKES
For the country’s direct investment, Chinese companies applied for Board of Investment (BoI) privileges in 2019 worth 262 billion baht, an all-time high for that country.
Chinese applications last year also saw a steep increase of almost five times, compared with 55.5 billion baht in 2018.
With these statistics, the Chinese value also surpassed Japanese applications, valued at 73.1 billion baht in 2019. Japan has ranked as the largest investor in Thailand for the past several years.
It’s a clear sign that Chinese companies are broadening their country’s economic power to Thailand.
Jareeporn Jarukornsakul, chairwoman and chief executive of WHA Corporation Plc, the logistics warehouse and industrial estate provider, said Thailand should deal with the trend because the country cannot ignore China’s expansion into Southeast Asia.
“The US-China trade war is a key reason for the huge relocation of production facilities and operations, and Chinese companies favour Southeast Asia, connecting it with China’s Belt and Road Initiative,” Ms Jareeporn said. “Over the past 10 years, China’s government invested heavily in megaprojects, resulting in high growth of GDP and people demand, so Chinese companies have to diversify their operations.”
Aat Pisanwanich, director of the Center for International Trade Studies at the University of the Thai Chamber of Commerce, said China’s growing influence is a bit worrisome, with the government urged to improve regulations to supervise foreign investments and protect Thai investors.
The government should not be too open to Chinese investment, or any other foreign investor, he said, since this may eventually cause Thai people to lose their occupations.
“Chinese businesses and investors are abundant now, not only in trade but also in logistics, services and education,” Mr Aat said. “It is scary if the government ignores this threat.”
According to Mr Aat, doing business in