Contaminated Chinese imports threaten Thai markets. Shift from China to India ahead. The Thai retail and manufacturing sector is under pressure from tainted imports. Government urged to tighten oversight. Manufacturing and agriculture are at risk.

Thailand is making plans to shift its trade focus away from China and towards India in the longer term. It comes as news emerged this week of contaminated fruit and vegetables being dumped on Thai markets from China. Many of the substandard products are for sale at a fraction of the cost offered by Thai producers and farmers. Similarly, Thailand’s manufacturing sector especially in fashion and furniture, is being decimated by China. Recent figures show only a 30-45% utilisation of factory capacity in these sectors. The current predicament raises sharp questions about the Thai government’s trade and economic development policies over the last ten years. In short, these can be directly linked to the challenges being faced today by farmers and small business concerns.

Industry Minister Pimphattra Wichaikul has ordered the Customs Department to step up checks on imports from China. The plan is to ensure that all Chinese imports meet Thai Industrial Standards Institute (TISI) requirements. It comes with rising concerns about cheap imported fruit and vegetables from China contaminated with pesticides.

A top official with the Federation of Thai Industries (FTI) is sounding the alarm over pesticide-contaminated fruit and vegetable imports from China and other bordering countries.

He is urging the government to enhance scrutiny of produce from neighbouring countries to safeguard consumer health.

In particular, there is concern about escalating imports from China.

Federation of Thai Industries (FTI) Chairman says quantities of cheap Chinese food produce contain chemicals banned in many countries across the globe

‘Thailand continues to import fruit and vegetables contaminated by chemicals banned in many countries,’ disclosed Kriengkrai Thiennukul, FTI Chairman. In short, he stressed the need for meticulous inspection to avert health risks.

In January 2024, imported fruit and vegetable values surged by 8.4% year-on-year to ฿13.2 billion. This is, according to FTI data. The imports encompassed a variety of items, including oranges, tomatoes, kale, basil, chillies, and cauliflower.

To bolster consumer confidence, Mr Kriengkrai proposes strengthening the inspection workforce to scrutinise imported produce thoroughly.

The FTI is also highlighting the broader consequences of tainted imports on Thailand’s agricultural sector.

Agriculture is a pivotal contributor to the nation’s GDP. While Thailand has long progressed to a second-generation industrialised economy, its economic base is still agriculture.

At the same time, concerns are being raised about Thailand’s rising trade deficit with China. This was ฿1.29 trillion in 2023. 

In recent weeks, Prime Minister, Srettha Thavisin, ordered action on the dumping of cheap Chinese products on Thai markets. 

Concessions made by the previous government to Chinese online giants. In February, it emerged that 70% of elephant pants sold globally were made in China

At length, this has been aided by concessions to large Chinese online behemoths made by the previous government. In particular, in the form of advanced facilities utilising the benefits of the Eastern Economic Corridor (EEC) and convenient customs arrangements.

The issue was highlighted in February when it became clear that 70% of elephant pants sold online were made in China. Despite the product being culturally associated with Thailand, Thai manufacturers and retailers were cut out.

However, the new contamination issues relating to food products extend beyond agriculture. Not only is it a public health concern, there are broader economic challenges from Chinese imports. 

Rising number of vulnerable manufacturing firms in Thailand priced out of the market by Chinese exporters in turn reducing output and therefore employment

At length, the federation previously warned against the influx of low-cost Chinese products. Undoubtedly, they pose a threat to the local competitiveness of small Thai enterprises.

The proliferation of Chinese goods has spread across multiple industries. These include steel, aluminium, plastics, ceramics, petrochemicals and medicine. It poses challenges for local manufacturers.

For example, recent data shows only 40% of manufacturing capacity in its fashion and leather sectors is presently being utilised.

The FTI is therefore calling for stringent inspection protocols, as some imported items may not meet requisite safety and environmental standards.

Thailand may not be ready for large free trade pacts

An issue not being raised so far is the Regional Comprehensive Economic Partnership (RCEP). This trade pact came into force in 2022 after Thailand ratified it in October 2021.

The free trade agreement liberalised markets between the ASEAN Community including Thailand, China and other Indo-Pacific countries.

Significantly, India pulled out in 2019 at a summit in Bangkok.

The combination of government policies which have allowed huge Chinese online giants to be based in Thailand, easier access to Thai consumers as well as a trade agreement that is undermining Thailand’s uncompetitive farmers and industry should be noted. 

Downside to closer ties between China and Thailand. It is not just the criminality threat but also that Thailand is the net loser in trade between the two 
PM wakes up to the threat of cheap Chinese goods dumped on Thailand driven by misguided economic policies
Elephant pants should be a Thai success story. Instead, it is a story of economic policy failure as manufacturing slips

Thailand saw a 5.11% reduction in manufacturing activity in 2023. While exports this year are picking up, there is serious concern for its manufacturing base.

Industry minister orders action. Customs ordered to enforce Thailand’s quality standards code expecially when it comes to the condition of imported goods

In response to such concerns, Industry Minister Pimphattra Wichaikul has taken action.

This week, she instructed the Thai Industrial Standards Institute (TISI) to work closely with Customs to address the issue. She ordered the monitoring of imported goods’ quality, particularly those under TISI supervision.

The objective is to stem the inflow of substandard goods into the country.

Despite these efforts, Mr Kriengkrai emphasises that many low-quality items continue to infiltrate the market. He urgently called for robust oversight measures to safeguard consumer well-being.

The problem is being echoed within Thailand’s retail industry.

As 2024 progresses, it is reporting economic headwinds. The situation is certainly exacerbated by a flood of cheap imports from China. 

Despite efforts to stimulate consumer spending, the sector remains fragile.

The stagnant purchasing power of Thai domestic consumers, in turn, is hindering growth prospects for local entrepreneurs.

Thai retail sector facing a slow year

Undoubtedly so, according to Chatchai Tuongratanaphan, Vice-President of the Thai Retailers Association. 

On Monday, he said the retail sector’s growth in the first half of 2024 is projected to be a mere 1-2%.

The subdued outlook is attributed to various factors. For instance the termination of the Easy E Receipt scheme and delayed government fiscal budget disbursements.

Tax incentives implemented to spur spending had only a limited impact. In short, these primarily benefited affluent urbanites who tend to purchase non-essential, high-priced items.

Chatchai highlighted the necessity for additional stimulus measures or government spending to bolster consumer confidence and drive purchases.

Retail growth however still projected at 3% in 2024, ahead of the government’s overall GDP growth projection. Driven by higher prices and larger purchases

He anticipates a potential acceleration in retail activity in the third quarter. He suggested this will contribute to an overall growth forecast of 3% for 2024. This is ahead of official GDP projections.

Currently, the National Economic and Social Development Council (NESDC) only projects 2.7% growth in 2024.

Economic advisory board confirms sluggish growth in 2023 and slowing economy coming into 2024. Since 2019, Thailand’s economy has gone backwards in real terms

However, persisting challenges such as rising living costs and a high non-performing loan outlook continue to dampen consumer spending power. In particular, among middle and low-income segments.

The non-food segment of the retail industry is expected to grow faster than the food segment. In effect, this is due to higher prices and larger purchases.

Plans being advanced to spur spending by well-to-do and foreign tourist shoppers with a suggested plan to turn Phuket into a tax-free shopping destination

While there are approximately 8-10 million consumers in the upper middle class with potentially strong spending power, this is constrained. Basically, their ability to spend is contingent upon government initiatives and incentives to restore confidence.

Chatchai suggests short-term initiatives to stimulate spending among high-value consumers. One such move would be to transform Phuket into a tax-free shopping destination. 

Such a strategy, coupled with domestic tourism incentives, could stimulate high-spending buyers to purchase locally, thus supporting Thai businesses.

The influx of cheap Chinese goods poses a significant challenge to the retail sector. Undoubtedly, it is beginning to undermine it. 

The hard facts were highlighted by Sanan Angubolkul, Chairman of the Thai Chamber of Commerce. China’s status as a major global manufacturing hub, coupled with tax and tariff waivers, makes competition difficult.

Consequently, Thailand has seen an inundation of low-cost products in its domestic market from its next-door neighbour.

In turn, this has exacerbated competition for local SMEs increasingly leaving factory capacity idle.

Challenge for Thai manufacturers to get their share of the country’s domestic retail market being overtaken by cheap Chinese imports. Jobs are being lost

Kasikorn Research Centre also forecasts a 3% increase in retail sales for 2024. 

Unquestionably, this will be largely driven by foreign tourist spending and higher prices for certain items. However, the proliferation of Chinese imports presents a formidable obstacle for Thai manufacturers.

Especially so in the fashion and food sectors.

In 2023, Thailand imported ฿470 billion in consumer goods from China. The figure rose 2.8% from 2022. This represented 41% of all imported goods into the kingdom.

Many of the items were daily-use materials and non-household electrical goods. 43.3% were items such as those classified as consumer goods. This was followed by fruit and vegetables both fresh and processed at 10%. 

Secondly, clothing and footwear at 9.3%. Finally, for household appliances, furniture and decorations, this was 9.1%.

Kasikorn Research Centre has produced a report highlighting the competitive advantage Chinese firms hold over their Thai counterparts. This is especially concerned with fashion manufacturing and furniture. At present, Thai firms in these areas are only utilising 30-45% of manufacturing capacity.

Consequently, Thai jobs and livelihoods are in danger.

Price of garlic from Sisaket is ฿150 to ฿200 per kg. Imported Chinese garlic flooded the market at a price of ฿40 kg per kg. Unsustainable for farmers

Thaniwan Kulmongkol, President of the Thai Restaurant Association, confirms the trend. She points to the disruptive impact of cheap Chinese food imports on local farmers’ competitiveness.

The price differential between imported and locally produced agricultural products, such as garlic, undermines the viability of domestic agriculture.

For example, Thai garlic from Sisaket province may cost ฿150 to ฿200 per kg. In contrast, Chinese imported garlic sells from ฿40 per kg. The situation is unsustainable. 

The kingdom is simply not competitive without strict quality controls.

In the long term, Thailand’s economic chiefs may want to rethink the country’s trade policies and face hard and unpalatable facts. 

The kingdom, like India, is not yet ready for open markets. Certainly not when faced with the power and scale of its largest trade partner to the north.

Consequently, it is reported that Thailand is readying to gravitate more towards India in the coming years to forge economic opportunities.

At the same time, the kingdom must confront the chronic structural problems impacting its competitiveness.

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