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Thailand on track for double-digit rise in Belt and Road investment flows from China

Jul 03. 2019
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Thailand will experience a double-digit increase in Chinese investment from the Belt and Road Initiative (BRI) in the next decade after witnessing an inflow of US$24 billion from Chinese investments in the past 10 years, a Chinese bank executive predicts.




“Asean will become the next central hub for Chinese investments in the next 10 years, with Thailand being in an advantageous position as it lies in the centre of the region,” said Zhigang Li, chairman of the board of directors and executive committee of the Industrial and Commercial Bank of China (Thai) Plc.

Li was speaking on Wednesday at a Fitch Thailand Investor Briefing event titled “China's Credit Outlook and Investment in Asia Pacific”.

The chairman expects a rapid acceleration of Chinese investments as part of the BRI to flow into the region, citing low tariff levels, abundant opportunities for economic growth, strong demand in infrastructure development and strategic geographical location as the region's key advantages.

From 2013 to 2018, $24 trillion of BRI-related capital flowed into Thailand, according to research by the CIMB Asean Research Institute (CARI) titled “China's Belt and Road Initiative and Southeast Asia”.

However, Thailand is notable in lagging its Asean neighbours, with Indonesia gaining the largest BRI-related capital flows of $171 billion, followed by Vietnam with $152 billion, Cambodia $104 billion, Malaysia $98 billion and Singapore $70 billion in the same period, the research states.

To boost investments, the Thai government will need to step up its efforts to provide more incentives and institutional support to Chinese investors eyeing the Kingdom's market, Li said.

The key sectors which BRI investments will be targeting in Thailand, he said, included energy, infrastructure and logistics.

In 2018, up to 44 per cent of China's GDP was spent on investments abroad, he said.

Given that there is a high demand for infrastructure investment in the Asia Pacific region, China's BRI investments are set to increase significantly to capitalise on this opportunity, he said.

By 2030, the Asia-Pacific region will need an additional $26 trillion in infrastructure investments to meet the demands of the region's economies, according to research by the Asian Development Bank titled “Meeting Asia's Infrastructure Needs.”

Of these countries, the Asean region will need $3.1 trillion or 12 per cent of Asia-Pacific's total infrastructure investment demand by 2030.

“Furthermore, the Chinese government has also been encouraging some Chinese manufacturers to relocate in the Asean region,” Li said. “One such company which has plans to expand their manufacturing base to Thailand in the next two years is Shanghai Automobile.”

Meanwhile, China's shift in its own domestic economic policy will also have indirect positive impacts on the Asean region, said Stephen Schwarts, senior director and head of the Asia Pacific sovereign ratings for Fitch Ratings Hong Kong.

Thailand's exports to China have been in decline since the first half of 2019 due to the US-China trade conflict. This is because Thailand is in the supply chain affected by the tariffs that the US has imposed on China.

In May, Thailand's exports to China declined by 8.7 per cent year on year, valued at $11.6 billion, according to the Commerce Ministry.

However, Schwarts contends, certain export goods from Thailand stand to benefit from China as it has been stimulating its economy through fiscal means in recent years, largely through cuts in income tax.

This, he said, has caused consumer spending in China to increase significantly, leading to higher purchase in various consumer goods which China may import from Thailand, such as agricultural products and commercial goods.

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