Thailand’s economy is bleeding, with over 100 factories closing each month since 2021. Experts blame cheap Chinese imports, rising debt, and collapsing consumption. Without urgent reforms, the nation faces a full-scale manufacturing and growth meltdown.
A former Prime Minister’s Office official, leading business figure, and senior Bangkok Bank executive has urged the government to urgently reassess Thailand’s industrial policies. This call follows troubling data revealing a steady decline in the manufacturing sector’s contribution to GDP over recent years. The primary cause is China’s growing influence on the Thai economy through cheap imports and Chinese-owned industries that outsource early-stage manufacturing processes to the mainland. Similarly, a top investment industry executive writing for Reuters on Tuesday echoed this concern. Like other ASEAN countries, Thailand has faced increasing challenges since 2018 and the onset of the first US-China trade war. Since 2021, the kingdom has been losing over 100 factories each month.
On Tuesday, Dr Kobsak Pootrakool, a former minister and senior Bangkok Bank executive, issued a dire warning. Thailand’s manufacturing sector is collapsing, while domestic consumption remains weak.
Together, these trends threaten to halt economic growth. At the same time, Manishi Raychaudhuri, a prominent market strategist, echoed these concerns.
His detailed note highlights a flood of cheap Chinese imports undermining ASEAN economies, especially Thailand and Malaysia.
China’s export pivot to Southeast Asia is flooding Thailand with finished goods that undercut local producers
Manishi Raychaudhuri is the founder and CEO of Emmer Capital Partners in Hong Kong. He is a former BNP Paribas Asia-Pacific Equity Research head. He gave a blunt assessment. China is redirecting export flows due to trade tensions with the West.
Beijing has shifted many finished goods shipments to Southeast Asia. Thailand serves as a key entry point for these products. Consequently, ASEAN markets face massive pressure from Chinese imports.
Raychaudhuri explained these goods are not raw materials or components. Instead, they are fully assembled finished products such as electric vehicles (EVs), electronics, furniture, and textiles.
These items enter ASEAN mainly through e-commerce channels, bypassing traditional distributors. This trend sharply increases Chinese market penetration and hurts local producers.
Thailand has lost over 100 factories a month since 2021 as Chinese competition squeezes out local SMEs
Since 2021, over 100 factories have closed every month in Thailand. Many are small and medium-sized enterprises (SMEs) in sectors like furniture, steel, garments, and electronics.
For example, Indonesia’s textile sector saw 80,000 job losses last year amid similar pressures. In Thailand, these closures accelerate a long-term trend of declining industrial activity.
Raychaudhuri also pointed to Chinese foreign direct investment (FDI) as “disruptive by design.” Companies like Biyadi or BYD and Contemporary Amperex Technology Co., Limited (CATL) are expanding aggressively. BYD’s new EV factory in Thailand aims for 150,000 units annually.
However, these factories undercut local parts suppliers. Since the factory’s opening in July 2024, at least a dozen Thai auto parts firms shut down. Similarly, CATL invested $5.8 billion in Indonesia’s nickel sector but recently halved the project. These moves highlight both opportunity and risk from Chinese capital.
Raychaudhuri highlighted a structural shift in ASEAN manufacturing. Chinese finished goods flood local markets, creating oversupply and price wars. As a result, local firms face severe margin pressure. These companies cut costs, delay investments, or close altogether. This cycle reduces employment and incomes, weakening domestic consumption.
Purchasing indices fall across ASEAN as Chinese imports and household debt compound Thailand’s slowdown
Moreover, purchasing managers’ indices (PMIs) across ASEAN indicate contraction. Thailand, Malaysia, Indonesia, and the Philippines all show slowing manufacturing activity.
This contraction reflects external shocks from US-China trade disputes and internal challenges of rising household debt.
Thailand, in particular, is vulnerable. Raychaudhuri warned cheap Chinese imports and investment could further hollow out the manufacturing base.
He noted Thailand’s loss of about 5,000 factories since 2021. Meanwhile, local consumption growth is sluggish due to rising debt. Household debt in Thailand now stands at record levels. This reduces spending power and depresses growth.
In addition, Raychaudhuri stressed the role of e-commerce platforms in accelerating Chinese imports. Platforms like Lazada and Shopee provide easy access to Chinese goods.
As a result, local retailers and distributors lose market share. Traditional manufacturing supply chains are disrupted, forcing many SMEs to exit.
Zero-dollar Chinese transits inflate Thai exports while real private consumption falls far short of target
Both Raychaudhuri and Dr Kobsak touched on another problem: distorted trade figures. Thailand’s exports jumped 13.8% in Q1 2025. However, a significant share comes from “zero dollar” exports—Chinese goods re-routed through Thailand.
These shipments inflate Thai export statistics but add little real value to the economy. Several Thai ministers have acknowledged this distortion. This complicates policy decisions based on misleading trade data.
Dr Kobsak’s analysis highlights stagnant private consumption growth. At just 2.6% in Q1 2025, it is far below the 5–6% rate needed for robust growth. High household debt is the main reason. Consumers burdened with loans spend less on big-ticket items like cars and appliances. Rising bad debts also threaten financial stability.
This weak consumption compounds manufacturing’s troubles. Factories close, workers lose jobs, and spending falls further. Without stronger domestic demand, Thailand’s growth outlook dims sharply.
Cheap Chinese goods risk deflationary spiral and force ASEAN to consider protectionist countermeasures
Raychaudhuri warned ASEAN faces “imported deflation.” Cheap Chinese goods push prices downward. While consumers benefit short term, businesses suffer. Lower revenues lead to wage cuts and layoffs. Consumers then postpone purchases, expecting even cheaper prices later. This cycle can spiral into economic stagnation.
Thailand already teeters on mild deflation, alongside China. Malaysia and Singapore face similar risks. These pressures may force ASEAN governments to adopt protective policies. However, such moves could slow ASEAN’s economic integration.
Both experts called for urgent reforms. Dr Kobsak urged Thailand to restructure its economy rapidly. He highlighted the need to reduce household debt and promote new industries. Without these changes, Thailand risks falling behind regional rivals.
Raychaudhuri added that ASEAN might need to rethink its trade policy. Governments could tighten rules of origin to prevent becoming transit hubs for Chinese goods. Protectionist measures may increase to defend local industries. However, this might slow ASEAN’s deeper integration goals.
Thailand pushes new sectors but growth outlook remains bleak amid debt crisis and collapsing consumption
The Thai government’s Board of Investment (BOI) has sought to encourage new sectors. Investments in medicine, semiconductors, and hybrid vehicles show promise. For instance, Mazda plans to invest ฿5 billion in mild hybrid electric vehicles (MHEVs). SUBCON Thailand’s recent business matching event generated ฿2.8 billion in deals. These efforts aim to diversify the industrial base.
Despite these initiatives, the problems run deep. The National Economic and Social Development Council (NESDC) forecasts only 1.8% GDP growth in 2025. Export growth will be weak or flat. This contrasts sharply with the 3.1% Q1 expansion, which mainly reflected temporary export spikes.
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Much of the export growth resulted from US buyers rushing imports ahead of tariff changes. However, the underlying domestic economy remains fragile. High household debt, factory closures, and shrinking consumption paint a bleak picture.
Thailand stands at a critical juncture. It’s traditional manufacturing and consumption-driven growth model faces unprecedented pressures. Cheap Chinese imports and investments reshape industries rapidly. Household debt dampens domestic demand, slowing economic momentum.
As Raychaudhuri warned, ASEAN must carefully balance trade openness with protecting local industries. Meanwhile, Thailand must accelerate reforms to reduce debt burdens and boost new industries. Without swift action, Thailand’s economic engine risks stalling permanently.
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