Trade Relations Between China and Thailand: Essential Insights

China-Thailand Economic Partnership: A New Dawn in Trade and Investment

An Overview of the Bilateral Relationship

In 2023, China emerged as Thailand’s largest foreign investor, a significant milestone that highlights the robust economic ties between these two neighboring countries. This development not only showcases China’s growing influence in the Southeast Asian region but also emphasizes Thailand’s strategic position as a manufacturing and investment hub. The bilateral trade volume between China and Thailand reached an impressive US$126.3 billion, marking the 11th consecutive year in which China has held this status as Thailand’s primary trading partner.

Deepening Interdependence in Trade and Investment

The economic partnership between China and Thailand is characterized by a profound interdependence in both trade and investment. Foreign Direct Investment (FDI) from China has surged in Thailand, particularly in sectors such as electronics, automotive (including electric vehicles), and smart agriculture. Chinese enterprises invested about US$7 billion across 588 projects in Thailand as of 2023, propelling the nation to the forefront of electric vehicle production in Southeast Asia. This growth has been fueled by supportive initiatives like Thailand’s EV3.5 program, tariff reductions through RCEP, and zero tariffs on imported used machine tools.

Key Areas of Trade

Trade forms the backbone of the China-Thailand partnership. Thai agricultural exports to China, primarily tropical fruits, have become a critical element of Thailand’s agricultural output, comprising over 40 percent of production in 2023. Conversely, 80 percent of China’s exports to Thailand consist of essential capital and intermediate goods that cater to Thailand’s manufacturing sector. The Belt and Road Initiative (BRI) has facilitated faster and cost-effective trade routes, enhancing this mutually beneficial relationship.

Main Areas of Trade from China to Thailand:

1. Capital and Intermediate Goods

   • Machinery and Equipment: A vast amount of machinery and industrial equipment vital for manufacturing comes from China.
   • Electronics: The electronics sector relies heavily on Chinese consumer electronics and components.
   • Automotive Parts: China is a key supplier of automotive parts crucial for Thailand’s automotive industry.

2. Chemical Products and Pharmaceuticals

   • Medicines: China exports various pharmaceuticals and medical devices to support Thailand’s healthcare needs.
   • Industrial Chemicals: Thailand imports a broad array of chemicals, including raw materials for manufacturing.

3. Textiles and Apparel

   • Raw Textiles: China supplies raw materials essential for Thailand’s textile industry.
   • Clothing: Finished garments are imported at competitive prices, enriching Thailand’s fashion market.

4. Food Products

   • Processed Foods: A variety of processed food products, including snacks and beverages, are supplied to Thailand.

5. Metals

   • Steel and Iron: Essential for infrastructure and manufacturing, large quantities of metal products come from China.

Thai Exports to China: A Diverse Portfolio

Thailand’s export landscape to China is equally vibrant, characterized by a diverse array of goods:

1. Agricultural Products

   • Tropical Fruits: Thailand leads as a key supplier of fruits such as durian and mango, marking a substantial trade volume.
   • Seafood: A wide variety of seafood products, including shrimp and fish, grace Chinese markets.
   • Rice: Renowned for its premium jasmine rice, Thailand is a major rice exporter to China.

2. Natural Rubber

   • Rubber: Thailand’s significant production of natural rubber serves Chinese manufacturing, specifically in tire production.

3. Wood and Paper Products

   • Timber: Wood and related products are exported for construction and furniture manufacturing in China.
   • Paper Products: Thailand supplies paper and pulp, which are essential for various industries.

4. Electronics

   • Electronic Components: Crucial components for China’s vast electronics manufacturing sector come from Thailand.
   • Consumer Electronics: Finished products also find their way into the Chinese market.

5. Precious Metals and Jewelry

   • Gold: Thailand exports gold and other precious metals, catering to China’s luxury market demands.

Strategic Enhancements: RCEP and BRI

The Regional Comprehensive Economic Partnership (RCEP) and the Belt and Road Initiative (BRI) play pivotal roles in strengthening trade ties. RCEP, effective from January 2022, has enhanced trade networks and reduced tariffs among its members, resulting in notable growth in Thailand’s trade with RCEP countries. This has led to a significant uptick in trade volume.

BRI has diversified trade routes, prominently exemplified by the China-Laos Railway, which has reduced transport time for Thai goods, such as durians, making them more accessible in China.

Promoting People-to-People Exchanges: Visa-Free Travel

An exciting development on the horizon is the introduction of visa-free travel between China and Thailand starting in March 2024. With the 50th anniversary of diplomatic relations approaching, this milestone is poised to enhance cultural and commercial ties, leading to increased travel and exchanges. A surge in interest has already been observed, notably a 200 percent rise in searches for “Bangkok” on Chinese travel platforms.

About ASEAN Briefing

ASEAN Briefing is part of the Asia Briefing brand and is backed by Dezan Shira & Associates, a leading professional services firm guiding foreign investors in Asia, including offices across various countries and regions. For those interested in business opportunities in Thailand and further insights on the economic developments, resources are readily available through their platforms.