China becomes Thailand’s top source of foreign investment for first time

For more than five decades, Japan was the largest investor in the southeast Asian nation, but a number of factors conspired to knock it off the top spot

Analysts have warned of future risks, however, in an economy already buffeted by currency appreciation, a fall in tourism and severe drought

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Thailand’s Prime Minister Prayuth Chan-ocha pictured with his Chinese counterpart, Li Keqiang. Photo: Xinhua

Published: 12:00pm, 24 Jan 2020Updated: 12:00pm, 24 Jan 2020

China topped the list of economies looking to invest in Thailand for the first time last year, overtaking Japan as the southeast Asian nation’s main source of foreign direct investment thanks to belt and road-linked projects, overspill from the US-China trade war and Thai government incentives.

Applications from China – valued at 262 billion baht (US$8.5 billion) – accounted for more than half of all foreign direct investment applications, according to Thailand’s Board of Investment. Japan’s applications, meanwhile, were valued at 73.1 billion baht, followed by 36.3 billion baht of applications from Hong Kong.

However, the vast majority of Chinese investment agreed upon last year was linked to a 224 billion baht high-speed rail project connecting the airports at Suvarnabhumi, Don Muang and U-tapao. Contracts for the project were signed in October between the Thai government and a consortium whose members include the Chinese state-owned China Railway Construction Corporation.

Siwat Luangsomboon, an analyst at Kasikorn Research Centre, noted that such major infrastructure projects would “not happen every year” and that before the deal was signed, Japanese investment had actually exceeded that from China in the first nine months of 2019.

Bangkok, Thailand’s capital, has seen a slew of investment from Japan over the decades. Photo: EPA

Japan has been the largest investor in Thailand for more than five decades, and its investments have subsequently “matured”, according to Pavida Pananond, a lecturer at Thammasat Business School in Bangkok. Chinese investment, meanwhile, is at a relatively “early stage of development” so is “likely to record a faster growth rate and larger initial flows”, she said.

“While annual flows of Chinese investment may exceed that of Japan this year, thanks partly to the relocation of Chinese firms [hit by the trade war with the US] and incoming Chinese investment related to the high-speed train projects, it will take a while for accumulated Chinese investment to exceed that from Japan,” she added.

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