Influx of cheap Chinese goods a spoiler for local businesses in Thailand
In a post on its official Facebook account on September 4, the Chinese Embassy in Thailand called the trade between the two countries “mutually beneficial and win-win.”
“Almost 80% of the goods that Thailand imports from China are capital goods and intermediate goods that are used for production and added value before being exported,” the statement said.
Most of the so-called cheap goods "are products used in daily life, food, health products, clothing and accessories, etc., which account for less than 10% of the total value of goods imported from China,” it added.
The statement came after Thailand announced new measures to combat the influx of cheap Chinese imports threatening its manufacturing sector. The Bangkok Post reported on August 28 that Thailand's deputy prime minister and minister of commerce, Phumtham Wechayachai, said the government would set up a task force comprising 28 agencies that would meet every two weeks to review and revise regulations to curb the threat of cheap Chinese imports to the already weak economy.
The Federation of Thailand Industry previously warned that cheap Chinese goods could cause a "tsunami" in Thailand and in the region, and that in 2023 the low-cost imported products had contributed to the closure of nearly 2,000 factories.
Pavida Pananond, professor of international business at Thammasat Business School at Thammasat University in Thailand, said low-priced Chinese goods or Chinese capital are often concentrated in Thailand's e-commerce and electric vehicle industries. While Chinese investment has increased foreign direct investment in Thailand, it has also made it difficult for many smaller local enterprises to survive.
“Right now, the Chinese are facing restrictions on their products in many markets,’’ Pavida told VOA in a Zoom interview. ‘’So, it is natural that we are seeing the Chinese products targeting more emerging markets, particularly in Southeast Asia. So, those sectors would be at risk of having direct competition from the Chinese, cheaper products. And I think in the longer term, there also is more impact on the Thai economy.”
The Chinese Embassy quoted preliminary statistics in its statement and said more than 1,000 Chinese companies have invested in Thailand. In the past two years, 588 investment projects by Chinese have been submitted to the Thai government, with an investment value of nearly $7 billion, according to the Chinese Embassy. Most investments are in the electric vehicle industry, the digital economy, new energy, and modern manufacturing.
The Thailand Economic and Business Research Center forecasts that the Thai economy will grow by 2.6% this year due to tourism and exports, but it will also be dragged down by manufacturing. In the first half of 2024, Thailand's industrial output decreased by 2% compared to the same period last year.
Chinese e-commerce platform Temu entered Thailand on July 31. Observers are worried that cheap Chinese goods flooding Thailand’s market through Temu will lead to unfair competition, supply chain disruptions, and rising unemployment. Srettha Thavisin, Thailand’s former prime minister, previously asked authorities to investigate whether Temu has complied with the relevant regulations and paid the tax due.
Nisit Panthamit, director of ASEAN Studies and an associate professor at the Faculty of Economics at Chiang Mai University in Thailand, said, “If you buy it from China, you have to wait for so long to get that item. But the local [products] are easy to find in the market. Now, after more goods are coming in from the new [Chinese] companies, that's why the SME [small and medium-sized enterprise] might get heavily impacted.’’
Nisit said if the Thai government cannot introduce more effective policies to alleviate the problem soon, sales of Thai-made goods may decline significantly. Also, he said, some basic Thai products may be replaced in local markets by inferior Chinese-made replacements.
He said that indications are that, by the end of 2024, there will be a 10% to 20% drop in the sales and consumption of local Thai products, because of competition from more Chinese-made goods.
The New York Times reported at the end of July that Thailand’s auto industry, which often is referred to as the "Asian Detroit" because of its manufacturing capacity, had been dominated by Japanese cars. In recent years, however, Chinese electric vehicle companies have made inroads, resulting in local auto factories closing and some land prices soaring, economists in Thailand say.
“When the Thai government welcomes the EV cars from China without much long-term planning for Thai suppliers in automotive industry, vehicles and parts, that could be something that could negatively affect the Thai economy,” Pavida said.
In July, Thailand's Ministry of Industry required Chinese EV manufacturers to use at least 40% local components when assembling EVs to support Thailand's automotive supply chain. In response, China's Changan Automobile pledged to invest $282 million, in Thailand, and the proportion of local parts will reach 60% and then increase to 90%; Shanghai-based Neta Auto also said it would increase the proportion of Thai car parts from 60% to 85%.
There are also increasing concerns that Chinese companies may exploit Thailand as an "illicit transshipment hub" to evade U.S. and European tariffs and sanctions. Illicit transshipment refers to exporting products through a third country to circumvent higher tariffs.
Bloomberg reported on August 22 that since many Chinese solar companies have set up factories in Southeast Asia in an attempt to circumvent U.S. import tariffs, Washington seems to be preparing to impose high tariffs on ASEAN countries such as Thailand, Vietnam, Malaysia and Cambodia.
“We should also be concerned about Thai companies that import Chinese supplies for their intermediate products, and then re-export these [finished products] to other countries like the U.S. or the EU,” Pavida said. “This could end up being against the regulations that the EU and the U.S. are tightening.”
Pavida added that further study of the many layers and elements of Chinese imports are needed as well, so policies can clearly and specifically address different kinds of Chinese products.
VOA's Adrianna Zhang contributed to this report.