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3 Sep 2013

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Thailand’s Trade Deficit with China Hits Record High: Proactive Strategies Needed (Current Issue No. 2396 Full Ed.)

It is widely known that Thailand has sustained a trade deficit with China for some time. However, recent deficits have widened substantially since the Chinese economy began to slow, thus inhibiting our exports to China since then. In July, Thai shipments to China declined for a fourth consecutive month to 5.3 percent YoY, equivalent to USD2,104 million, though imports from China surged to a record high of 9.7 percent YoY to a USD3,553 million, thus becoming our highest-ever monthly deficit with them at USD1,449 million. It is likely that it will rise further in coming months, undermining our overall trade position, since China is our largest trade partner.
If Thailand's exports to China do not improve significantly, it is expected that our trade deficit with China will likely lean toward our current projection at around USD12.1 billion, which would be a record high versus the USD10.2 billion deficit in 2012.
However, we at KResearch are of the view that Thailand's outward trade to China will likely rise toward the yearend, supported by various Chinese initiatives in August to aid their manufacturing and export sectors. In addition, they will likely raise inventories before the New Year festive season and import more agricultural products from Thailand to offset shortfalls there following natural disasters. These factors should help ease our trade deficit with China somewhat later on, though it would be quite difficult for Thai exports to perform as well as in the past since China is undergoing major economic restructuring.
Amid a gloomy export outlook, Thai businesses are being urged to adopt proactive strategies by expanding customer bases there. We should participate in more trade exhibitions, especially the upcoming “Canton Fair” – the largest annual trade exposition in China – which will be held between October 15 and November 4, as this event will offer opportunities for Thai businesses to find new trade partners. Having strong trade partners would not only bolster purchase orders, but also help sustain Thai export growth to China ahead.

To be successful at such events, we must be well-prepared. We should also improve our Chinese language skills and have all documentation translated into Chinese to assist in transactions. Products to be showcased should have outstanding quality. We should also participate in other activities that foster relations with Chinese counterparts. However, we will need to be prudent in trade contracts with counterparts there.

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