Thai PM raises the alarm over Chinese product onslaught: Trade deficit balloons, economic future growth and well being is at risk. The government is urged to act swiftly to safeguard local industries and tackle the influx of cheap goods. A danger that extends beyond the economy. The threat to national security also exists long term due to Chinese subsidies for its agriculture and fisheries industries.

Prime Minister Srettha Thavisin raised the red flag this week against cheap Chinese imports undercutting Thai producers. His rhetoric was backed up by efforts by officials to raise regulatory barriers and axe concessions to the deluge of Chinese products which have left Thailand with a ballooning trade deficit. However, this is an even more significant problem. In effect, it highlights at least a decade of misguided economic policies. In short, Thailand has been blindsided by China. The previous government, in particular, failed to see the real threat posed not only to the kingdom’s manufacturing base but also its food security and even its stability in the longer term.

Prime Minister Srettha Thavisin has ordered urgent action to tackle the influx of cheap imports from China into the kingdom, fueling a ballooning trade deficit with its northern neighbour. Officials are proposing to reimpose some regulations on tax charged at the point of entry, in addition to other measures. However, the threat posed by China’s state subsidies and economic policies to Thailand is also long-term. Of course, it has also been exacerbated by the policies pursued by the previous government.

The Thai government this week confronted mounting concerns over the influx of cheap Chinese goods inundating Thailand’s domestic market.

Certainly, Prime Minister Srettha Thavisin urged the Revenue and Customs Departments to take measures to curb the trend.

The Prime Minister’s call for action comes in the wake of rising disquiet voiced by various economic bodies.

Top economic bodies and industry panels concur now that there is a problem. The evidence is the trade deficit and mounting losses caused to Thai industry

 This includes statements from the Joint Standing Committee on Commerce, Industry, and Banking (JSCCIB). There is a growing consensus about the adverse impact of these products on local producers and sellers.

The JSCCIB heralded, for instance, Thailand’s expanding trade deficit with China over the past three years. The kingdom’s imports vastly outweigh its exports, resulting in a significant economic imbalance.

Unquestionably, China is Thailand’s biggest trading partner. Interim figures released previously under the ASEAN China Free Trade Agreement showed that from January to October 2023, Thailand’s total trade with China was $87.62 billion, down by 1%.

According to figures released by the Ministry of Commerce, the pattern remained for the whole of 2023.

For the full year, it boasted a total trade value of $105 billion. However, the same data showed a staggering $36.6 billion surplus heavily skewed in Beijing’s favour.

China is Thailand’s biggest trading partner. However, the winner from the trade is undoubtedly China and not Thailand driven by widespread state subsidies 

The trend comes with a sense of malaise about Thailand’s economy mirrored by that seen in China. Thailand’s Stock Exchange of Thailand (SET) has plunged over the last year in line with China’s indexes.

At the same time, Asian indices have soared.

In contrast, Thailand’s trade with the United States, the kingdom’s largest export market by far, shows a consistent trade surplus.

Thailand exported $47.19 billion in goods and services to the United States in 2022. For the first 11 months of 2023, this was $44.9 billion, up by 3.02%. The country’s trade surplus with the United States came in at $31.39 billion in 2022.

Concerns in relation to trade with China are not short-term. They have the potential to gradually undermine not only Thailand’s economy but its stability

The concerns for Thailand in relation to trade with China extend well beyond the short term.

China’s trade surplus comes from Chinese state subsidies to its industrial sector. Such subsidies are also being applied to its agriculture and fisheries output.

Due to free trade agreements which have opened up Thailand to Chinese products and services, Thailand has become vulnerable.

Not only does China pose a real threat to Thailand’s manufacturing base but also to its agricultural sector with an ageing population. 

In short, this poses a critical economic threat. In addition, it is also a rising threat to the security and stability of Thailand in the long term. 

A key factor in China’s growing influence is its huge population, economic power and in particular, its proximity.

Recent red flag or alarm was the exploitation of the Thai elephant pants phenomenon by Chinese manufacturers who clearly undercut and outsold Thai firms

The exponential growth of the Chinese import sector has reached startling proportions.

At length, even quintessential Thai products like the iconic elephant print trousers. At this time, the popular garments among tourists are predominantly manufactured in China.

Figures show that 70% of elephant pants for sale online were made in China.

Elephant pants should be a Thai success story. Instead, it is a story of economic policy failure as manufacturing slips

On Thursday, Prime Minister Srettha underscored the urgency of the situation. In short, he acknowledged the negative impact on local manufacturers. 

Thai firms now find themselves unable to compete on price due to the inundation of cheaper Chinese alternatives.

Moreover, concerns have been raised regarding the lack of standard certification for these imported goods.

Significantly, they often infringe upon intellectual property rights, further compounding the challenges faced by local producers.

PM calls in the customs men to pursue stringent oversight of Chinese goods being imported into Thailand as an initial measure to tackle the growing problem

Mr Srettha underscored the need for stringent oversight on customs declarations on Thursday. In addition, he cited instances where importers deliberately under-declare the value of goods to exploit VAT and import tariff waivers.

From this week, the customs service will rigidly enforce tariffs and tax charges on incoming goods.

In response to these pressing concerns, Lawaron Saengsanit, the permanent secretary for the Ministry of Finance, briefed reporters.

The top official disclosed that discussions are underway among relevant government agencies. In brief, potential measures are being explored to stem the tide of cheap Chinese products. 

One proposal is the termination of VAT and customs privileges for Chinese products valued at less than ฿1,500.

The government has also not ruled out potentially amending regulations to better align with current market dynamics.

It is worth noting that Thailand previously adjusted its regulations in 2018 under the Asia-Pacific Economic Cooperation (APEC) framework.

Previously, it raised the maximum price threshold for VAT and customs duty exemptions from ฿500 to ฿1,500. 

However, such moves may not be as effective as planned.

The reason is that many large Thai importers are already operating from within Thailand.

In truth, the previous government provided concessions for large Chinese online wholesalers, especially those using the Eastern Economic Corridor (EEC).

Rising trade deficit with China rings alarm bells just as it did previously in the United States until a trade war took off in 2018 under President Trump 

However, the widening trade deficit with China demands action.

Undoubtedly, it may necessitate further intervention to safeguard the interests of local industries.

For example when the United States imposed tariffs on China in early 2018. This was under controversial US President Donald Trump. However, his policy was effective.

Thai PM confirms China as Thailand’s ‘No.1 partner’
China and Thailand forging deeper ties which may pose a problem for western firms in the future

Formerly, the share of US imports from China was 21.6%. In 2023, this fell to 14%. At the same time, the US economy has powered ahead except for the pandemic.

However, China’s share of world exports remained at 15%, so its output is being sold somewhere else.

The ramifications of the influx of Chinese goods extend beyond Thailand’s borders. The situation has global implications.

China’s extensive use of subsidies and protectionist trade measures has triggered concerns worldwide.

The threat from China is being particularly felt in countries heavily reliant on less advanced industries for sustenance and livelihoods. In effect, Thailand is especially vulnerable.

In the agricultural sector, China’s substantial subsidies have distorted global markets. The Communist country’s output is depressing prices and undercutting the competitiveness of farmers in developing countries. 

China’s massive state subsidies extend to the manufacturing of cotton as well as agriculture and fisheries.

China poses a threat to economies worldwide especially the poorer and developing ones, for instance, those dependent on agriculture and fishing output 

For instance, China’s ascendancy as the world’s largest cotton subsidiser has had profound ramifications for cotton-producing nations in sub-Saharan Africa.

In truth, it exacerbates poverty and economic disparities leaving those countries open to exploitation.

It is an artificial economic engine previously designed to power Chinese growth. However, this is now floundering as financial investment has not only dried up but moved into reverse. China’s economy is presently in a state of crisis.

Similarly, China’s dominance in fisheries fuels overfishing and depleted global fish stocks.

Unquestionably, this further disproportionately impacts vulnerable communities reliant on fishing for food security and economic stability.

The aggressive expansion of China’s industrial fishing fleet into international waters has further exacerbated tensions. This is particularly true in regions like West Africa, where local fishermen face encroachment from large-scale Chinese trawlers.

China presents itself as a proponent of global development through its rhetoric of ‘win-win’ economic globalisation. In truth, reality paints a starkly different picture.

Thailand must counter a grave threat from the unabated influx of Chinese made goods as well as agricultural and fisheries produce dumped on the kingdom 

The adverse effects of China’s trade policies and subsidies on poorer nations underscore the need for greater accountability.

In short, it cries out for reform to ensure fair play.

Prime Minister Srettha’s call to action underscores the gravity of the threat posed. The continued and expanding influx of Chinese goods into Thailand’s domestic market must be tackled. 

Addressing the issue requires a multifaceted approach. It will mean regulatory reforms, enhanced oversight and international cooperation.

Undoubtedly, the Ministry of Commerce must question the country’s international trade policies and free trade pacts.

This will be needed to mitigate the devastating impact on local industries which cannot compete against Chinese state subsidies. The Thai government must seek a more balanced, realistic and fairer trading environment. 

Pheu Thai Party and Future Forward MPs in 2019 and 2020 warned of China’s takeover of the online goods trade in Thailand facilitated by the government

At the same time, the issue is not new. 

In 2019 and 2020 before the pandemic, it was raised in parliament by the now ruling Pheu Thai Party.

Previously, MPs raised concerns about Thailand’s growing alignment with China.

They questioned the impact it is having on Thai firms and nationals economically. These concerns sparked a heated debate over whether Thailand risked becoming a vassal state to China.

In parliament, Pheu Thai MPs accused the then government of transforming the country into a Chinese colony.

Chinese domination of Thailand’s e-commerce sector to grow further with the Eastern Economic Corridor
MPs warned of an economic colony as opposition zeroed in on Thailand’s impaired relationship with China

Back then, Future Forward MP Ekkapob Pianpises boldly stated: ‘People are saying that Thailand has already become a province of China.’ 

Dr Ekkapob, representing Chiang Rai in northern Thailand, highlighted several areas of concern. 

This included the influx of Chinese condominium buyers driving up property prices in Bangkok, manipulation of fruit markets by Chinese firms, and the control exerted by China over the water levels of the Mekong River.

Huge Chinese behemoths since have dominated the online e-commerce trade in Thailand from within the kingdom as well as without with huge tax concessions

One of the most contentious issues raised by Dr Ekkapob was the growing dominance of Chinese-owned e-commerce platforms in Thailand. 

He criticised the government’s policy of granting tax breaks and incentives to Chinese giant Alibaba, which owns or controls major players in the Thai market such as Lazada and Shopee

The former MP is now an environmental and political activist. He warned then about Alibaba’s activities in Thailand. He suggested that it may lead to the establishment of an ‘economic colony’ in the country.

Similarly, his concerns are echoed by Pheu Thai MP Saratsanun Unnopporn who is still in parliament. She accused Alibaba of behaving like a representative of the Chinese government.

Ms Saratsanun meanwhile is also an economics expert. She warned that concessions made to Alibaba could harm Thailand’s economy rather than help it. This was the claim made by the previous government.

The rise of Chinese-owned e-commerce platforms poses a significant challenge to Thai firms, particularly small businesses. Especially as they struggle to compete with the resources and market power of these giants. 

Eastern Economic Corridor (EEC) being used by large Chinese firms as a trojan horse to sell Chinese products and undercut smaller Thai e-commerce firms

In 2019 and 2020, this was the view of Pawoot Pongvitayapanu of the Thai E-Commerce Association. 

He warned that Thailand’s e-commerce sector was being dominated by Lazada and Shopee, both of which are Chinese-owned.

Mr Pawoot expressed concern about the impact of this dominance on Thai entrepreneurs. At length, they were forced to seek niche areas with less competition to survive.

The situation was exacerbated by the previous government’s ambitious projects such as Thailand 4.0 and the Eastern Economic Corridor. 

In short, the Eastern Economic Corridor (EEC) became a facility for the Chinese behemoths to base themselves in Thailand. These were automated warehouses using AI type technologies. 

At the same time, they gained from both internal market access and enhanced logistics. Certainly, this included tax incentives as well as a more seamless order delivery process.

New Alibaba logistics hub in Thailand hailed 

In January 2023, Thailand announced a ‘free trade hub’ in association with Alibaba. This is located within the Eastern Economic Corridor (EEC).

The media was told that the facility was aimed at promoting Alibaba’s Electronic World Trade Platform (eWTP) to promote e-commerce.

If successful, the digital free trade hub announced it would allow consumers in Thailand and China to buy products from each other’s markets more easily and quickly.

The launch of the digital free trade hub was portrayed as part of Thailand’s efforts to position itself as a top Southeast Asian logistics centre for trade and e-commerce.

In effect, the hub is designed to allow consumers in Thailand and China to jointly access goods from each other’s markets.

Massive Eastern Economic Corridor (EEC) projects effectively help entrench the dominance of Chinese firms like Alibaba in the online e-commerce sector

Alibaba, in a statement, said it was one of Southeast Asia’s top logistics centres.

While the Thai government aims to promote technological transformation and attract foreign investment, the end results may be somewhat different or less than beneficial.

Instead of driving growth, for instance, such projects may simply entrench the dominance of Chinese firms in key sectors of the economy.

Such investments undoubtedly spell bad news for many indigenous local Thai firms as the market moves inexorably online.

In effect, they may cause smaller Thai firms to lose out to competition from scaled Chinese firms selling products subsidised by the state.

Join the Thai News forum, follow Thai Examiner on Facebook here
Receive all our stories as they come out on Telegram here
Follow Thai Examiner here

Further reading:

Elephant pants should be a Thai success story. Instead, it is a story of economic policy failure as manufacturing slips

It’s not an economic crisis, it’s a quagmire of structural problems that cannot be fixed overnight

Central bank: the corporate bond market is sound but the economy needs long-term structural reform

Government closely monitoring Thailand’s corporate sector bond market. Fears of a pending crisis

PM again attacks central bank on interest rates as deputy Finance Minister raises bond concerns

PM takes aim at the Bank of Thailand over interest rates despite Thailand’s lower borrowing costs

Thai economy is stable but is being strangled by personal debt. Fixing it could see pain before any gain

Steady as she goes growth and economic stability driven by a growth in US exports is all good news

Economy at crossroads: World Bank calls for structural reform to avert two decades of low growth

Former Deputy PM warns Srettha that if he does not listen, he may spark a real economic crisis in Thailand

Fragile, weak economy sees central bank holding interest rates and reducing 2023 growth to 2.4%

Srettha’s crisis is not just an economic one, it is a ‘3D debt crisis’ that is strangling GDP growth

Zombie Thai firms holding back economic growth as they struggle just to pay interest on bank debt

Incoherent government economic policy clashes with Bank of Thailand’s efforts to rein in debt

Srettha outlines Digital Wallet as his government begins to flounder with a faltering economy and confusion