7-8-2023 (BANGKOK) When China announced the country’s surprise reopening in January, every business sector in Thailand responded enthusiastically to the news, particularly the tourism industry, which earned over 530 billion baht from Chinese visitors in 2019. But the feeble recovery of China’s economy since then has caused middle-income earners to face salary cuts, leading them to save rather than spend on travel.
The Tourism Authority of Thailand (TAT) estimates just 4 million Chinese visitors will generate 250 billion baht in revenue this year – only 50% of the 2019 level. Regaining even that is a huge challenge as Thailand struggles to grow its economy, says TAT governor Yuthasak Supasorn. But he believes Chinese visitors’ spending won’t fall much due to pent-up demand after years of lockdown, especially among independent tourists with high purchasing power.
Average Chinese incomes look set to keep falling into 2024, curbing future growth, Yuthasak adds. But Narongsak Putthapornmongkol, president of the Thai-China Chamber of Commerce, says while some workers face cuts, many like factory, railway and electronics staff are getting raises.
China has created 6.7 million new urban jobs and added over 180 million rural workers to cities, so should achieve 5% GDP growth this year, Narongsak notes. With more Chinese firms looking abroad, Thailand can gain from relocation, he believes.
RELOCATION AND INVESTMENT
Chinese tourist numbers have missed early-year forecasts. But more wealthy Chinese view Thailand as a long-stay spot, judging by surging Thailand Elite Card sales. The scheme expects 5,000 new Chinese members this year, generating 5 billion baht, says operator Thailand Privilege Card.
President Manatase Annawat insists the slowdown won’t affect these high-end tourists. Chinese are among the top groups seeking offshore relocation, favouring Thailand for its proximity, hospitality and attractions.
Unlike tourism, mainland investment should accelerate as entrepreneurs expand abroad, believes the Federation of Thai Industries (FTI). “Thailand remains on China’s radar,” asserts FTI chairman Kriengkrai Thiennukul.
China’s real estate woes, lower US exports and graduate unemployment are hitting spending and domestic travel. But investment is different, Kriengkrai explains. The Sino-US technology war has pushed firms to relocate production overseas. Using Thailand as an export base should ease worries about US trade barriers.
Many large Chinese tyre makers are building Thai factories, while major electric vehicle (EV) investment is coming too, he adds. Thailand’s EV promotion policy also attracts Chinese makers eyeing local manufacturing. Booming domestic EV demand is another lure. “Thailand always welcomes Chinese investment,” Kriengkrai emphasises.
The slowdown offers chances for Thai startups to enter China, which the National Innovation Agency will push this year, says executive director Krithpaka Boonfueng. More Chinese venture capital should flow into Thai health and sustainability firms, benefiting both nations, she predicts.
ECONOMIC REPAIR
Thai Chamber of Commerce chairman Sanan Angubolkul says China reopened too hastily amid weak confidence, slowing recovery. Slower global growth threatens 2023 exports too. But China aims to stimulate growth via infrastructure spending, private investment incentives and campaigns to boost consumer activity.
In recent weeks, policies promoting goods purchases, appliance subsidies, events and fee cuts have helped pump up the economy. Despite falling incomes, Sanan believes these measures will aid second-half recovery.
On tourism, the Thai-China Chamber found many Chinese retain a strong desire to travel, though economic and political factors may limit trips to regional destinations. So more Chinese could visit Thailand, Sanan suggests, if visa and flight hurdles can be overcome.
STIMULUS POLICY
Finnomena, a fintech investment brokerage, says foreign capital returned to China last week after stimulus based on fiscal policy was announced – a first for China. Recent crises like Covid were handled via monetary policy. And 2022’s rate cuts and reserve ratio reductions disappointed, slowing recovery and markets.
But last week’s measures covering real estate, consumption and investment spending could be a turning point, Finnomena believes. This fiscal stimulus is overdue in China. The policy shift and stock-buying signal foreign confidence in recovery.
Panyapiwat Institute president Sompob Manarangsan agrees stimulus like easier second home rules can aid spending. Easing mobility curbs also helps growth prospects, he adds.
CAUTIOUS OUTLOOK
Thailand’s Fiscal Policy Office now expects 5.5 million Chinese tourists this year, down from an initial 7.1 million forecast, says director Pisit Puapan. But 4.5 million Malaysians should offset the fall.
First half exports to China dropped 3.7% amid the slowdown, Pisit notes. China takes 12% of Thai exports, just behind the US share of 16.6%.
The weak recovery hits Thai trade in goods like durian, says economist Sompob Manarangsan. It is also limiting foreign direct investment, though China remains Thailand’s second largest investor after Japan.
Sompob blames low consumer demand and private investment for China’s slow rebound. Unemployment among 16 to 24-year-olds has soared to 21.3% – well above US and European rates.
MAJOR BENEFICIARIES
With recovery still patchy, China aims to stimulate consumption, says Asia Plus Securities. New EV infrastructure and dining incentives align with local policy goals. Other moves like travel subsidies, fee cuts and affordable housing promotion will also help.
ASPS expects the measures to boost demand for appliances and condos. Commodity prices should also pick up as China’s vast consumption rebounds. More driving will mean new tyre sales, while improved earnings will help debt repayment.
As top trade partner, accounting for 22% of Thailand’s trade, the kingdom stands to gain as China rolls out further stimulus this year, ASPS concludes.
