# Thailand’s Manufacturing Sector Struggles with Underutilization as Chinese Competition Intensifies - Link: https://www.thailand-business-news.com/business/285543-thailands-manufacturing-sector-struggles-with-underutilization-as-chinese-competition-intensifies - Published: 2026-02-11T09:39:43+07:00 - Author: J. Allan Thailand’s once-robust manufacturing sector is facing a protracted slowdown, with factory capacity utilization hovering below 60 percent for the past two years, raising concerns about the country’s economic competitiveness and industrial policy effectiveness. ## Key takeaways * Thailand’s manufacturing sector is operating at below 60% capacity for two consecutive years, with only one-third of industries recovering to pre-pandemic lockdown levels. * Ultra-low priced Chinese imports and the influx of Chinese FDI (21% of total by 2024) are displacing Thai manufacturers, particularly in rubber, plastics, and food production sectors. *  Stagnant credit access since 2022 is preventing Thai manufacturers from upgrading technology and innovating, trapping the economy in a low-growth equilibrium that requires long-term financial policy intervention. The manufacturing sector, which accounts for 24 percent of Thailand’s GDP, 15.7 percent of total employment, and approximately 80 percent of exports, has been operating in the doldrums despite government stimulus measures, according to recent analysis by Professor Archanun Kohpaiboon of Thammasat University. ADVERTISEMENT ## Pandemic Recovery Remains Elusive Data from Thailand’s Office of Industrial Economics reveals a troubling trend: in the first ten months of 2025, only one-third of industries achieved capacity utilization rates exceeding levels seen during the strictest COVID-19 lockdown period of April- December 2021. The sectors showing resilience include beverages, leather footwear, processed foods, kitchenware, and vehicle engines. > “The low and declining capacity utilization found in many industries indicate > that the demand for locally manufactured products is weak,” Kohpaiboon noted, > adding that while export performance has remained stable with Thailand maintaining > a 1.3-1.5 percent global market share, domestic-oriented manufacturers face particularly > acute challenges. ## The China Factor Analysts point to three primary factors behind the manufacturing malaise, with Chinese economic influence looming large in each. ### Related**Posts** ### 󠀁[Thailand Police Arrest 39 in Major Cross-Border Scam Crackdown, Seize THB500 Million in Assets](https://www.thailand-business-news.com/china/334263-thailand-police-arrest-39-in-major-cross-border-scam-crackdown-seize-thb500-million-in-assets)󠁿 ### 󠀁[Singapore Pillar Two Registration: Steps Multinational Groups Should Take](https://www.thailand-business-news.com/asean/329970-singapore-pillar-two-registration-what-multinational-groups-need-to-do)󠁿 ### 󠀁[ASEAN Can Weather a Typhoon, But a Taiwan Crisis Is a Different Story](https://www.thailand-business-news.com/asean/318167-asean-can-weather-a-typhoon-but-a-taiwan-crisis-is-a-different-story)󠁿 ### 󠀁[Thailand’s Floods Expose Severe Vulnerabilities in Its Automotive Supply Chain](https://www.thailand-business-news.com/business/332669-floods-in-thailand-highlight-the-vulnerability-of-the-countrys-automotive-supply-chain)󠁿 First, an influx of ultra-low priced Chinese imports appears to have undermined government demand-boosting initiatives. Between October 2020 and October 2023, Thailand implemented its “half-half” subsidy program five times, spending THB234.5 billion( approximately $6.5 billion) to stimulate consumer spending. However, experts suggest these programs may have inadvertently increased demand for cheap Chinese imports rather than domestically produced goods. Second, the surge in Chinese foreign direct investment has reshaped Thailand’s industrial landscape. By 2024, Chinese investors accounted for 21 percent of total FDI inflows. While this investment has brought capital, it has also led to displacement of Thai firms in key sectors. Between January 2021 and October 2025, 3,796 Thai manufacturing firms deregistered while 650 new Chinese firms entered the market, particularly in rubber and plastics, food production, and fabricated metal products. Many of these Chinese-owned operations maintain limited supply chain linkages within Thailand, preferring to import inputs from China and thereby reducing demand for Thai-manufactured components. ## Credit Crunch Compounds Problems The third factor is a stagnation in credit extended to the manufacturing sector. After years of steady growth, lending to manufacturers has remained virtually flat from 2022 to 2025, constraining firms’ ability to upgrade technology, pursue innovation, or explore new market opportunities. > “Businesses experienced great financial strain during the pandemic and were not > able to get adequate financial support,” Kohpaiboon observed, noting that government > pandemic measures focused primarily on worker relief rather than keeping businesses > operational. ## Call for Strategic Intervention To revitalize the sector, experts are calling for a fundamental shift in policy approach. Rather than short-term stimulus measures, Kohpaiboon argues the government needs a comprehensive strategy to improve firms’ access to long-term financial resources. > “These activities will incur short-term investment costs and need to be carried > out continuously,” he said. “They cannot be achieved by relying solely on short- > term financing, such as commercial bank lending.” The analysis warns that the current low-capacity utilization is trapping Thailand in a low-growth equilibrium, representing a critical gap in policymaking that demands urgent attention. As Thailand navigates increasing regional competition and technological disruption, the health of its manufacturing sector will prove pivotal to the nation’s economic trajectory. With Chinese competition intensifying and domestic industrial capacity languishing, the pressure is mounting on Bangkok to craft more effective, long-term industrial policies.