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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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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China has sought to invest in a number of sectors promoted by the Thai government – such as cars, smart electronics, biotechnology, logistics and aviation – attracted by tax rebates and deductions, preferential visa policies and “a lot of deregulation”, Kobsak Pootrakul, secretary to Thailand’s Council of Economic Ministers, told a press briefing earlier this month.
These revised investment incentives were rolled out following a year of currency appreciation, weaker exports, fewer tourist arrivals and lower agricultural prices, which have conspired to send Thailand’s growth forecasts tumbling to among the lowest in the region, at less than 3 per cent.
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Kriangkrai Tiannukul, vice-chairman of the Federation of Thai Industries, predicted a slow recovery for Thailand’s economy given the current global economic slowdown, ongoing geopolitical and trade tensions and a recent severe drought that has affected agricultural productivity and farmers’ incomes.
Yet he was hopeful for increased Chinese investment in the years ahead.
“I think we will see the Chinese coming ahead as Thailand’s biggest investors in the future,” he said. “Ultimately the value of their investments will surpass that of the Japanese.”
In addition to the high-speed railway linking three airports, infrastructure projects being rolled out by the Thai government that could attract further Chinese investment include some 2,000km of single-track railway that is set to be doubled, planned increases to airport capacity and an expansion of Bangkok’s mass transit network.
These opportunities, when combined with the policies being implemented to strengthen the country’s economy, small and medium-sized enterprise segment, agricultural sector, export competitiveness and tourism industry, make “this is the best time for companies to invest in Thailand,” said Kobsak, the government secretary.