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29 Oct 2010

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Thailand-China Trade: Earnings Reaching New High on Robust Demand (Business Brief No.2973)

The direction of bilateral trade between Thailand and China in September 2010 was consistent with China's robust manufacturing and consumption data, signaling that the Chinese economy remains resilient.Thailand's exports to China during that period continued to thrive, hitting a new monthly high of USD1.8983 billion, increasing 29.3 percent YoY, which was considerably higher than the 22.2 percent YoY gain in August. Also, it was the lowest trade deficit in six months with China.
However, there are several issues within the Chinese economy that must be monitored closely, as they may affect our exports to China in the months ahead. These matters include changes in the government's policies vis-à-vis inflationary pressure, possible slowdown in the Chinese economy due to prolonged global recovery and pending risks if local governments there are not be able to redeem their bonds, which could amount to massive debt defaults. Although the central government would eventually be forced to solve this problem as they have in the past, such an event could undermine economic performance in those provinces somewhat.

Given this, KResearch hasassessed that Thailand's exports to China will probably grow 30 percent in 2010, then decelerate to a 10-20 percent pace in 2011. However, this projection is dependent upon the export prices of certain Thai commodities, as they may be driven by the continuing depreciation of the greenback – e.g., cassava products, specifically for the production of alternative energy – as well as rubber and rubber products.

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