SCB tips big jump in Chinese investment

Manop Sangiambut, SCB’s China business head and executive vice president, said China’s focus on domestic consumption would provide opportunities for Thailand’s agricultural, food and services sectors in terms of increasing trade volumes with the country.

Meanwhile, Beijing’s "Go Out" policy is driving Chinese companies to expand their production bases to Asean, in order to reduce the high costs they face in China, he said.

Thailand is an attractive destination for such businesses, thanks to the Board of Investment’s eight-year corporate-tax exemption for foreign companies wishing to establish a manufacturing presence here.

China has already cancelled its own tax-incentive policy, as the government wants its private sector to invest outside the country to avoid anti-dumping cases.

Chinese investment currently represents less than 10 per cent of foreign direct investment in Thailand, but SCB believes this will double over the next five years, Manop said.

In geographic terms, Thailand is an attractive investment destination within Asean, while China and Thailand have recently strengthened cooperation through a number of schemes, including China’s involvement in the Kingdom’s high-speed rail plans and a clearing bank for Chinese yuan, he said.

Moreover, SCB is building collaboration with China from several angles with a view to supporting Chinese direct investment here, as well as Thai companies investing in the other direction.

The bank has linked up with major and medium-sized Chinese banks and financial institutions such as China International Capital Corp (CICC) to support such bilateral activity, said the executive.

While the loan portfolio of SCB’s China business is still small because the bank is in the initial stage of operations in the market, it hopes it will gradually expand in line with the growing inbound-outbound activities of Chinese and Thai companies, he added.

SCB is conducting a study into the feasibility of its representative office in Beijing applying for a licence for yuan-transaction business, after the Chinese government eased its regulations governing such operations.

Foreign banks can now apply for a yuan-transaction licence after operating in China for one year, instead of three years prior to the regulatory change.

Last week, SCB and CICC shared their China outlook for 2015 and beyond with a group of 50 SCB clients and fund managers.

At the seminar, Liang Hong, chief economist and head of research department at CICC, said the bank expected the mainland’s gross domestic product to post growth of 7.3 per cent this year.

Buffers in place

While this would be slower than expansion in 2014, growth is not the worry for the market because China has four buffers for enhancing its economy in the event that it is weaker than expected, she said.

She cited the country’s high reserve-requirement ratio, the current-account surplus, the high policy interest rate, and the government’s huge savings, which account for 50 per cent of the mainland’s GDP.

Moreover, China’s blue-chip stocks – led by banks, property firms and airlines – remain attractive to investors, she said.

Even though China’s economy will expand more slowly than in the past as the mainland reforms the country, there is no chance of there being a hard landing, the economist added.