Trade, investment targets with China: ambitious but achievable
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There was understandably a positive reaction to the recent announcement of an agreement between Thailand and China to try and increase bilateral trade by 20 percent annually over the next five years. This would boost trade to $100 billion by 2015, while t
I’m sure everyone would agree that the articulation of this ambitious goal is a very positive development for Thailand and its businesses. And it would be a brave person who bet against it being achieved, given the ever-growing strength of China and the increasing prospects for Thai businesses in China as that country’s consumer base widens.
The agreement was reached during Prime Minister Yingluck’s visit to China last month, when Thailand also signed-off on three new bilateral trade agreements.
These agreements focus on freeing up trade in such areas as agricultural products, infrastructure (including transport), tourism and intellectual property.
Of course, China is also interested in similar growth in trade and investment with other ASEAN countries, and here too it’s hard to see how their hopes will not be realised. Imports and exports from China to all ASEAN countries have quadrupled in the past seven years. Foreign direct investment from China to ASEAN has increased even faster, growing more than a hundred-fold over the same period. Since the ASEAN-China free trade agreement came into force in 2010, this trend has accelerated as ASEAN countries are increasingly being integrated into China’s manufacturing supply chain, as both suppliers of natural resources and as manufacturing hubs.
China’s investment presence in the region is particularly noticeable in areas such as transport infrastructure, with highways, railways and ports being built in many places. A big player in this is the Chinese Government’s $10 billion investment fund, partnerships and joint ventures, technical expertise and know-how for infrastructure development, as well as loans and aid programmes.
It’s not altruism that is behind China’s infrastructural investment. With better infrastructure, the regional economy will prosper and provide a healthy and growing market for China’s products; with better supply chains, manufacturing will be more efficient; and with better transport links, Chinese products will reach their markets much more quickly.
New transport links across the region are just the most visible signs of economic integration in ASEAN, which will gain added momentum with the establishment of the ASEAN Economic Community in 2015. For the next phase, China is even considering the establishment of an ASEAN Bank to help fund growth in the region, with a key aspect being the settling of intra-regional trade in yuan rather than dollars.
Thailand is clearly well positioned to enjoy the growing benefits of being part of such a dynamic region as ASEAN; China’s involvement in the region adds another rich layer of benefits to the mix.
