Display mode (Doesn't show in master page preview)

31 Aug 2006

International Economy

Sluggish Thai-Japanese Trade: Losing Out to Chinese Goods (Current Issue No.1898)

Among Thailand's four established export markets, Japan is the one that is most worrisome right now, and one that we should expedite exports to over the remainder of this year. Thailand's exports to the Japanese market have been the most sluggish among the existing trade partners, growing only 5.6 percent to a value of USD9,192 million in the first 7 months of this year, compared to the growth of 11.8 percent in the same period of 2005. This sluggishness goes against the trend of the Japanese economy that expanded steadily in H1/2006, growing 3.5 percent and 2.2 percent in the first and second quarters, respectively. It is estimated that the Japanese economy will grow 2.8 percent in 2006, compared to the 2.6 percent of 2005, which is considered the highest economic expansion for Japan in the last seven years.
This gloomy situation for Thai exports to Japan this year mainly stems from the reason that Thai goods are facing intense competition from Chinese goods, particularly in radio receivers, televisions, telecommunications equipment, garments, bags, furniture and edible consumer goods such as vegetables and fish, which Japan has begun to import more of from China. It is also the result of Japan's investment strategy of setting up many factories in China over recent years, given the low wages and the rather low cost of raw materials in China. At present, Japanese factories in China have begun to produce goods, and are gradually delivering these goods for sale into the Japanese market, resulting in the import value of goods from China advancing rapidly over the last 5-6 years. In addition, the relative proximity of Japan and China is also favorable to shipments between the two countries, being faster and more convenient than from here.
Japan is currently the second largest foreign investor in China, second to Hong Kong, with an aggregate investment of USD55.86 billion as of the end of July 2006, accounting for 8.5 percent of China's total aggregate foreign investment. Japan's investments in China are primarily for industrial manufacturing projects such as the production of electrical appliances, computer components, etc., plus real estate development and infrastructure projects for the Chinese economy, e.g., electrical power plants and fresh water supply, transportation systems, warehousing and telecommunications systems.
However, those Thai export products that have seen increases in Japan's market include mostly premium products that enjoy an export advantage, and are not in direct competition with China such as rubber and rubber products, automobiles and parts, lenses, machinery and parts thereof, as well as aluminum products. A point of note is that if China develops more diversified products, including those similar to Thailand's premium products, it is likely that Thailand will gradually lose competitiveness in the Japanese market to China. Therefore, Thailand needs to apply a strategy that focuses on product quality to strengthen its credibility in the Japanese market, together with greater diversification of products, and better differentiation from China's products by reflecting unique Thai qualities, in particular OTOP merchandise, which have the potential to attract high-end Japanese customers. This strategy would help preserve our share of the Japanese market.

Although Thailand still depends on traditional export markets such as ASEAN, the USA, European Union and Japan, where the average proportion is 60 percent of the total Thai exports per annum, Thailand has to expand its exports to other new markets, as well, because of the competition from new economies such as China, India and Vietnam. Such a strategy would disperse export market risk. At present, the exports of Thailand to new markets is exhibiting a higher proportion of around 38 percent of the entire Thai export value, compared to an average proportion of around 28 percent during the previous five years. Moreover, Thai exports to new markets grew by 25.9 percent in the first-seven months of 2006, compared to 11.6 percent to established markets during the same period. As a result, penetration into new export markets has been quite successful because they have already taken on a role in boosting the overall exports of the country in the first-seven months of this year. If Thailand can expand exports into new markets in other regions for further growth, such new markets would become new trade channels that could create a broader export network for Thailand in the near future.

View full article


Enter the code from the poll

International Economy