Durian diplomacy

The durian fruit has become an important agricultural commodity in Sino-Thai relations, with Thailand being the main exporter of durians to China.

But Thailand’s Move Forward Party’s proposal to form a “security alliance” with the US has raised concerns about the future of Thai-Chinese economic relations.

Key Takeaways

• The Thai agricultural sector is heavily dependent on the Chinese market for durian exports, raising concerns about the potential negative impacts of any changes in Sino-Thai relations or restrictive measures imposed on Thai fruits.
• Thai durians, particularly the Monthong variety, have become the most important agricultural commodity in Sino-Thai relations, with China accounting for 91% of Thailand’s annual durian exports.
• Thailand’s economy cannot be decoupled from China’s global trade influence, making it important for the country to diversify its markets.
• Asia’s factory activity slumped in June due to sluggish demand in China and advanced nations, posing challenges for the region’s exporters.
• China’s weaker-than-expected rebound from COVID lockdowns is impacting Asia’s economic recovery, as manufacturing activity contracted in Japan and South Korea

Thai durians, especially the Monthong variety, are preferred by Chinese consumers due to their yellowish color and soft texture. In the past two decades, China has imported 91% of Thai durians, making it the most important bilateral trade between the two countries. However, there are concerns about the dependency on the Chinese market and the need to diversify to other markets.

Thailand and China have a combined trade value of $100 billion, accounting for 20% of Thailand’s global trade. While the Thai government has been expanding access to other markets to reduce dependence on China, China still remains one of Thailand’s main trading partners, particularly in industries like electric vehicles.

The Federation of Thai Industries emphasizes the need for a balanced foreign policy that maintains ties with both the US and China, while also seeking new trading partners such as the Gulf Cooperation Council.

The Thai tourism industry also aims to diversify and attract niche markets to reduce dependence on Chinese tourists. However, the global economic slowdown and geopolitical issues between the US and China pose challenges for Thailand’s trade and investment prospects.

Factory activity in Asia declined in June, with Japan and South Korea experiencing contractions and China recording only marginal expansion. The weak rebound of China’s economy from COVID lockdowns is impacting Asia’s manufacturers, who are also concerned about the effects of aggressive interest rate hikes in the US and Europe.

The Caixin/S&P Global manufacturing PMI for China fell to 50.5 in June, indicating a slowdown. Japan’s PMI returned to contraction at 49.8, while South Korea’s PMI fell to 47.8, extending its downturn for a record 12th consecutive month.

Other countries, including Taiwan, Vietnam, and Malaysia, also saw a contraction in factory activity. However, India’s manufacturing industry expanded at a brisk pace in June, supported by robust demand. The fate of Asia’s economy, including China’s, will have a significant impact on global growth. The IMF expects Asia’s economy to expand by 4.6% this year, but has lowered next year’s growth forecast to 4.4% due to risks such as inflation and slowing global demand.