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Thailand is one of the beneficiaries of China’s post-pandemic boom, as it attracts more Chinese tourists and enjoys more trade and investment opportunities with its largest partner.
Tourism is a vital sector for Thailand’s economy, accounting for about 20% of its GDP before the pandemic. However, the outbreak of COVID-19 severely affected the industry, as international travel was restricted and domestic demand was low. In 2020, Thailand received only 6.7 million foreign tourists, compared to 39.9 million in 2019.
Fortunately, Thailand has been able to recover some of its tourism losses thanks to the return of Chinese tourists, who make up the largest share of its foreign visitors.
Chinese visitors’ post-pandemic return to Thailand may not be a panacea for the tourism-dependent country, but it is certainly a welcome boost.
According to Barron’s, the number of Chinese tourists in Thailand was 85% of pre-pandemic levels in the first quarter of 2023, and is expected to reach 100% by October 2023. This is much faster than other countries in Asia-Pacific, such as Japan or Australia, which are still struggling to reopen their borders and revive their tourism sectors.
Trade and Investment Opportunities
Besides tourism, Thailand also benefits from China’s post-pandemic boom in terms of trade and investment. China is Thailand’s largest trading partner and a major source of foreign direct investment (FDI). China also remained the top investor in Thailand in 2020, with $8.5 billion worth of FDI projects approved by the Thai Board of Investment (BOI).
Thailand hopes to leverage its strategic location and strong ties with China to benefit from the Belt and Road Initiative (BRI), a massive infrastructure and development project that aims to connect Asia, Europe and Africa. Thailand is part of the China-Indochina Peninsula Economic Corridor (CICPEC), one of the six economic corridors under the BRI.
The CICPEC covers several key projects in Thailand, such as the high-speed railway linking Bangkok with Nong Khai on the border with Laos, the Eastern Economic Corridor (EEC), and the Sino-Thai Rayong Industrial Zone.
These projects are expected to enhance Thailand’s connectivity and competitiveness, as well as create new opportunities for trade and investment with China and other countries along the BRI routes.
Demand for Industrial Land in Thailand
According to the Industrial Estate Authority of Thailand (IEAT), the occupancy rate of industrial estates rose to 80.3% in the first quarter of 2023, up from 78.9% a year ago. The IEAT also reported that it received applications for 1,024 hectares of land in the first four months of this year, exceeding its target of 800 hectares for the whole year.
Thailand is seeing a surge in demand for industrial land as China’s reopening boosts its exports and attracts more foreign investors.
One of the main drivers of this demand is China’s recovery from the Covid-19 pandemic, which has increased its appetite for Thai products such as electronics, rubber, and food.
Thailand’s exports to China grew by 18.5% year-on-year in the first quarter, accounting for 14.4% of its total exports. China is also Thailand’s largest source of foreign direct investment (FDI), with $1.9 billion of approved projects in 2022, up from $1.2 billion in 2021.
The rising demand for industrial land has also pushed up land prices and rents in Thailand, especially in areas near Bangkok and the EEC. According to CBRE Group Inc., a global real estate consultancy firm, the average selling price of industrial land in Greater Bangkok increased by 6.8% year-on-year in the first quarter, while the average rent rose by 4%. In the EEC provinces of Chachoengsao, Chonburi, and Rayong, the average selling price jumped by 14.5% and the average rent by 6.7%.
The IEAT expects the demand for industrial land to remain strong throughout this year and beyond, as China’s reopening continues to boost Thailand’s exports and FDI. The IEAT plans to develop more industrial estates and zones across the country, with a total area of 6,400 hectares by 2025. It also aims to promote green and smart industrial development, as well as enhance connectivity with neighboring countries through infrastructure projects such as railways and highways.
Diversification of supply chains by multinational companies
Another factor is the diversification of supply chains by multinational companies that want to reduce their reliance on China and take advantage of Thailand’s competitive advantages, such as its strategic location, skilled workforce, and favorable trade agreements. Some of the sectors that have seen increased FDI inflows include automotive, electronics, medical devices, and renewable energy.
For example, Chinese automaker Great Wall Motor vowed to double its investment in Thailand in Thailand’s Eastern Economic Corridor (EEC), a special economic zone that offers tax incentives and infrastructure support for high-tech industries.
Thailand’s Board of Investment (BOI) has expressed their readiness to promote trade and investment between Thailand and China.
Following the success of the “Invest in Shanghai, Share the Future” event, co-organized by the City of Shanghai, the Bank of China, and Thailand’s Board of Investment (BOI), Government Spokesperson Anucha Burapachaisri said Thailand remains very popular with Chinese investors.
He particularly highlighted the kingdom’s strategic location in the region, along with its efficient transportation, logistics and infrastructure systems. Additionally, the spokesperson cited the nation’s outstanding industrial estates, particularly the Eastern Economic Corridor (EEC), which could potentially link up with the Shanghai Lin-gang Special Area in the future.
Challenges and Risks
While Thailand enjoys many benefits from China’s post-pandemic boom, it also faces some challenges and risks. One of them is the over-reliance on Chinese tourists, which makes Thailand vulnerable to external shocks and fluctuations in demand. For instance, if there is another outbreak of COVID-19 or a political crisis in China or Thailand, it could affect the flow of Chinese visitors and hurt Thailand’s tourism industry.
Another challenge is the environmental impact of mass tourism, especially on Thailand’s natural resources and biodiversity. According to The Guardian, Thailand’s tourism boom has led to problems such as pollution, waste management, coral reef damage, wildlife trafficking and deforestation. The Thai government has taken some steps to address these issues, such as closing some islands and national parks for rehabilitation, imposing fines for littering and banning single-use plastics. However, more efforts are needed to ensure that tourism development is sustainable and respectful of nature.
A third challenge is the balance of power and interests between Thailand and China, especially in terms of trade and investment. While China offers many opportunities for Thailand’s economic growth and development, it also poses some risks such as debt traps, unfair competition, political influence and security threats. For example, some critics have raised concerns about China’s high-speed railway project in Thailand, arguing that it could saddle Thailand with huge debts, undermine its sovereignty and compromise its national security.