Thailand’s China trade deficit hits THB2.43tn, with THB3tn possible in coming years

Thailand’s trade deficit with China surged 53% year on year to THB2.43 trillion in the first nine months of 2026, raising concerns over the growing influx of Chinese goods and mounting pressure on domestic manufacturers.

The deficit for January–September widened from THB1.59 trillion in the same period last year, highlighting an increasingly uneven trading relationship between the two countries.

Associate Professor Dr Aat Pisanwanich, a lecturer at Rangsit University’s Faculty of Economics and an expert in international and ASEAN economics, told Thansettakij that Thailand’s annual trade deficit with China could exceed THB2.5 trillion in 2026.

That would mark the highest level in the 12 years since 2014, when the deficit stood at approximately THB445.1 billion. The increase over that period would exceed 400%.

Aat estimated that the deficit could rise further to THB2.6–2.7 trillion in 2027, potentially reaching THB3 trillion within the following few years unless Thailand takes more effective measures to strengthen domestic production.

Chinese imports increasingly dominate industrial supply chains

Thailand imported 1,187 categories of goods from China worth US$108.509 billion, equivalent to approximately THB3.52 trillion, during the first nine months of 2026, representing a 39% increase.

Industrial products accounted for 86% of the total, while agricultural goods made up the remaining 14%.

The five largest import categories were electrical machinery and components, mechanical machinery and parts, computers and related equipment, chemicals, and household electrical appliances.

Aat divided industrial imports into three main groups.

Capital goods, including machinery and equipment, accounted for approximately 10%, while intermediate goods such as components and production materials represented 52%. Finished products, including mobile phones, refrigerators, electrical appliances and consumer goods, made up the remaining 38%.

He acknowledged that Thailand may have limited alternatives to importing certain capital goods from China because Thai manufacturers cannot compete with Chinese production costs.

However, he argued that Thailand should urgently identify intermediate products that could be manufactured domestically, particularly electrical components, automotive chips, mobile phone parts and machinery components.

Chinese investment in Thailand could also provide an opportunity for the government to negotiate technology transfers and help Thai small and medium-sized enterprises (SMEs) become suppliers within Chinese manufacturers’ production networks.

Three import channels intensify pressure on Thai SMEs

Aat identified finished Chinese products as the most pressing concern because Thailand already has the capacity to manufacture many competing goods but struggles to match Chinese prices.

He outlined three main channels through which Chinese finished products are entering the Thai market.

The first is cross-border sales through Chinese e-commerce platforms. The second involves Chinese traders establishing businesses that import products directly into Thailand.

The third is a shift among some Thai manufacturers towards importing and reselling Chinese products after finding it increasingly difficult to compete on price.

According to Aat, six factors are accelerating the flow of Chinese goods into Thailand.

These include lower Chinese product prices, the expansion of e-commerce platforms and the ASEAN–China Free Trade Agreement, which provides zero import tariffs on many products.

The use of warehouses in Thai free zones also enables online orders to reach consumers within one or two days.

Meanwhile, the China–Laos railway has shortened delivery times to markets in northeastern Thailand.

Another factor is foreign direct investment from mainland China and Hong Kong. Chinese investors establishing operations in Thailand often continue importing machinery and production materials from their home markets.

Although cheaper Chinese products and machinery offer benefits to Thai consumers and businesses, Aat believes the wider economic disadvantages outweigh those gains.

He cited the outflow of money associated with the trade deficit, closures of Thai SMEs unable to withstand price competition, and insufficient technology transfers from Chinese investors to domestic businesses.

Thailand recorded a trade deficit with China of approximately THB2.262 trillion in 2025, reinforcing his concern that the imbalance is growing rapidly rather than gradually.

Rising US trade surplus brings additional scrutiny

The widening deficit with China could also expose Thailand to greater pressure from the United States, according to Aat.

Thailand recorded a trade surplus of THB1.67 trillion with the US during the first nine months of 2026, an increase of 38% from a year earlier.

He attributed the growth to two main developments.

First, US importers accelerated purchases ahead of potential changes to tariff policies under President Donald Trump.

Second, American buyers reduced imports from China and increasingly sourced products from ASEAN countries, particularly Thailand and Vietnam.

Aat described the situation as a snake eating its own tail: as the US reduces purchases from China, more Chinese goods are redirected towards ASEAN markets, including Thailand.

At the same time, Thailand’s exports to the US continue to expand, widening its trade surplus with Washington.

He cautioned that this pattern could prompt closer US scrutiny of Thailand over concerns about transshipment, including goods potentially being routed through third countries to circumvent trade restrictions, and industrial overcapacity.

Both issues are important in negotiations over the Thailand–US Agreement on Reciprocal Trade (ART), alongside discussions about access to the Thai market for certain American agricultural products, including pork.

Four measures proposed to strengthen Thai industry

Aat called for a revised trade strategy towards China, stressing that Thailand should aim to secure greater domestic economic benefits from Chinese investment rather than restrict investment itself.

His proposals centre on four areas.

First, stronger local-content and supply-chain requirements. Chinese companies investing in Thailand should be encouraged or required to use more locally sourced materials and Thai SME suppliers instead of relying almost entirely on imported machinery, components and labour.

Such measures would help create employment, strengthen domestic production networks and support technology transfers.

Second, greater opportunities for Thai products on Chinese e-commerce platforms. Aat proposed allocating space for locally manufactured products, establishing minimum shares for Thai goods and ensuring that platform fees do not prevent Thai businesses from competing effectively.

Third, temporary restrictions on selected agricultural imports. Thailand could consider limiting imports of products such as vegetables and garlic during domestic harvest periods.

He suggested that imports could be temporarily suspended for around three months, drawing on measures used by Indonesia to protect local agricultural producers.

Fourth, stricter product-standard inspections. Aat highlighted the need to strengthen enforcement of Thai Industrial Standards, particularly for imported steel products.

Thailand’s steel industry is operating at approximately 30% of production capacity, he noted.

Should utilisation fall to 25%, he believes the industry could face a serious threat to its survival, potentially allowing Chinese investors and suppliers to gain greater control of the domestic market.

Aat also encouraged Thailand to examine trade policies adopted elsewhere in Asia.

He pointed to India’s decision not to join the Regional Comprehensive Economic Partnership (RCEP), alongside its measures to protect domestic farmers and SMEs.

Vietnam, meanwhile, has introduced measures to protect selected industries, including local-content requirements in the steel sector, he noted.

Aat emphasised that Thailand’s objective should be to develop a more balanced economic relationship with China while ensuring that foreign investment contributes meaningfully to domestic industry.

“The challenge for Thailand is not to stop imports from China, but to ensure that trade benefits both countries,” he said.

“If Chinese investors establish operations in Thailand, they must create jobs, transfer technology and connect Thai businesses to their supply chains. Otherwise, Thailand will become merely a market for Chinese goods, while domestic manufacturers continue to weaken.”

Source: Thansettakij