China is defending itself against accusations that the cheap items it is bringing in are hurting Thai local businesses. In response to these charges, the Chinese Embassy in Thailand emphasized how advantageous trade is for both China and Thailand.
In contrast to nearly 80% of Thailand's imports of capital and intermediate goods needed for production, less than 10% of Thailand's imports from China are low-cost everyday items like food, clothing, and accessories, according to the Embassy's statement, which was released on September 4.
The remark was directed at recent steps that Thailand had taken to lessen the impact that low-cost Chinese imports were having on its manufacturing industry.
In order to address the issue, Thailand's Deputy Prime Minister Phumtham Wechayachai announced on August 28 the creation of a task force comprising 28 agencies. The group would meet every two weeks to evaluate and amend regulations.
Cheap Chinese goods could cause serious disruptions, including the possible closure of almost 2,000 firms in 2023 alone, according to the Federation of Thailand Industry.
Pavida Pananond, an international business professor at Thammasat University, notes that low-priced Chinese goods are particularly prevalent in Thailand's e-commerce and electric vehicle sectors.
Foreign direct investment has increased in Thailand as a result of Chinese investment, however, survival has become more difficult for smaller local enterprises due to increased competition.
Pavida contends that local economies like Thailand are at risk from the trend of Chinese goods going to emerging markets, particularly in Southeast Asia. According to recent data, over 1,000 Chinese enterprises have made investments in Thailand, especially in the areas of electric vehicles, digital economy, new energy, and contemporary manufacturing. These investments total roughly a billion over 588 projects, according to the Chinese Embassy.
Thailand's economy is expected to increase by 2.6% this year, mostly due to tourism and exports, but manufacturing is expected to remain poor despite these investments.
The nation's industrial output declined by 2% in the first half of 2024 compared to the same period the year before, underscoring the industry's difficulties.
Temu, a Chinese e-commerce platform, entered Thailand on July 31. This has sparked worries about unfair competition and possible supply chain disruptions, which could increase unemployment.
Former Thai Prime Minister Srettha Thavisin has called for investigations into Temu’s compliance with regulations and tax obligations.
Nisit Panthamit, an ASEAN studies director at Chiang Mai University, warns that increased competition from Chinese goods could significantly impact sales of Thai-made products and potentially replace local products with inferior alternatives.
He predicts a potential 10% to 20% decline in the sales and consumption of Thai products by the end of 2024 due to the influx of Chinese goods.
The New York Times reported that China’s entry into Thailand’s auto industry, which was previously dominated by Japanese cars, has led to the closure of local factories and rising land prices.
Experts warn that the absence of long-term planning by the Thai government for regional car suppliers could have a detrimental effect on the country's economy.
In an attempt to boost the regional automotive supply chain, Thailand's Ministry of Industry ordered Chinese EV manufacturers to incorporate at least 40% domestic components into their vehicles in response to these worries.
Chinese automakers such as Changan Automobile and Neta Auto have responded by pledging to raise the percentage of local parts in their cars to 85% and 60%, respectively.
There are also worries that Chinese companies might exploit Thailand as a transshipment hub to evade U.S. and European tariffs and sanctions by routing products through Thailand to avoid higher tariffs.
Bloomberg reported that Chinese solar companies have been setting up factories in Southeast Asia to bypass U.S. import tariffs, with potential implications for countries like Thailand.
Pavida Pananond highlights the need for further investigation into how Chinese products are being used in intermediate goods that might be re-exported, potentially violating regulations imposed by the U.S. and the EU.
She suggests that specific policies are necessary to address the various layers and impacts of Chinese imports on Thailand’s market.
The situation underscores the complexity of international trade dynamics and the challenges faced by local industries in adapting to global market changes.
Both Thai and Chinese stakeholders are navigating these issues as they work towards balancing economic benefits and protecting local industries from potential disruptions caused by global competition.
