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23 Aug 2010

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July Thai-China Trade Deficit Up 110.5% on Ebbing Exports (Business Brief No.2913)

Thailand's exports to China exhibited a further slowdown in July 2010, growing at only 29.6 percent YoY. Although this figure is close to the 26.3 percent growth recorded in June, it is still lower than the 39.4 percent rate seen in May. Meanwhile, Thailand's imports from China grew 40.1 percent higher in July, declining from the 62.1 percent rate in June. As a result, Thailand logged a trade deficit with China of USD409.5 million in July, increasing 110.5 percent YoY.
Although China has played an increasingly important role as a major export market for the Kingdom (recently replacing the USA as Thailand's largest export market), it is noticeable that Thailand has always sustained trade deficits with China. In 1H10, this figure reached USD1,319.8 million, which was higher than Thailand's overall trade deficit for 2009 at USD909.5 million. Therefore, if our exports to China continue to lag behind Chinese imports over the remainder of 2010, the 2010 deficit will surely be more than double that of 2009.
KASIKORNRESEARCH (KResearch) maintains our projection for Thailand's exports to China in 2010 at 25-30 percent growth, whereas the import growth should be at least 40 percent YoY. Given this, Thailand's trade deficit with China in 2010 may reach USD3 billion. However, that deficit may decline due to thriving border trade between Thailand and southern China in response to stronger purchasing power and demand from Chinese consumers in that region, or if Thailand is able to bolster exports to the western region of China.

Meanwhile, Thai exporters are advised to focus on upgrading their product quality because that would not only help maintain our image, but also differentiate our products from Chinese-made alternatives. Such endeavors would significantly boost our export growth to the Chinese market, which is home to ever-increasingly affluent consumers who want premium quality products.

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