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5 Nov 2013

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Thai Exports to China: One of Top Three in ASEAN Possible Ahead (Current Issue No. 2424 Full Ed.)

In his remarks at the 16th ASEAN-Summit in October 2013, Chinese Premier Li Keqiang pledged to take ASEAN-China relationship from a “golden decade” to a “diamond decade” ahead with targets to expand bilateral trade to at least USD1 trillion, and investment to USD150 billion by 2020. Such an elevated relationship would help enhance ASEAN's role within China.
Given this, key issues that Thai exporters should monitor closely will include not only the impact of the Chinese economy on our export performance, but also shipments of other ASEAN member states to China, since they have been making greater inroads there over recent years. In 9M13, China's imports from Cambodia, Laos PDR, Myanmar and Vietnam (CLMV) together grew 9.9 percent YoY, whereas contractions were seen from other ASEAN member states, including a 2.3 percent shrinkage in its imports from Thailand. This suggests that the beginning of heightened competition among ASEAN member states for exports to the world's most populous nation has arrived.
Nevertheless, KResearch is of the view that we will be able to maintain our status as one of China's top three ASEAN trade partners in coming years, based on our export competitiveness and greater diversity in Thai exports that should be marketable there. This, coupled with our proximity to China – which can be easily reached via various modes of transport under development by China per its policy of promoting regional connectivity – will help bolster our exports sent there. However, we must brace for steepening competition from ASEAN rivals, particularly Indonesia and Vietnam, whose exports are equally competitive.
Over the past five years (2008-2012), heightened competition within ASEAN on exports began to undermine Thailand's export share in the Chinese market. As a result, our export share to that market has fallen to 19.2 percent of the ASEAN total, currently, from 22 percent in 2008 as cheaper exports from Vietnam eat into our previous export share there. Vietnam's shipments to China have become more competitive due to substantial gains in their manufacturing potential and low transport costs because of the common border it has with China.
Aside from Vietnam, the value of Indonesian exports to China have also increased substantially too, though they do not yet compete with Thailand in their export product structure. Meanwhile, Malaysia has been able to maintain its export share quite well in the Chinese market. Myanmar and Laos may not be able to rival Thailand now, but their manufacturing potential is growing and more of their products are being shipped to China.

Amid work to build ASEAN-China relationships into the “diamond decade”, Thai exporters are advised to expedite plans to strengthen their manufacturing capabilities, increase output, create better value in their products and introduce new products, since these efforts would help increase the competiveness of Thai exports that have already lost market shares in China. Those include electrical and/or mechanical machinery/components, as well as computers/components that are heavily dependent on the Chinese market. In addition, Thai exporters should find new distribution channels and markets in China to maintain their export performance and bolster Thailand's international trade with China as a key export destination.

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