Evergrande collapse in China set to hit Thai tourism and exports

The Thai tourism and export sectors are set to experience a significant impact due to the financial downfall of China’s real estate giant, Evergrande. The Evergrande collapse revelation came from Poonpong Naiyanapakorn, Head of Policy and Trade Strategy Office (PTS), Ministry of Commerce, today. He suggested business operators closely monitor the situation.

Evergrande, a giant in China’s real estate sector, accounts for nearly one quarter of China’s economy. It also holds the distinction of being the world’s most indebted business. The troubled company declared bankruptcy last week.

Poonpong anticipates that the Evergrande collapse will negatively affect the Thai economy, slowing down the growth of Thai tourism as Chinese consumers start to reduce their consumption and overseas travel.

Chinese tourists account for 28% of all foreign tourists visiting Thailand. Before the Covid-19 outbreak in 2019, Thailand welcomed 11.1 million Chinese visitors, contributing approximately 53 billion baht to the economy. However, in the first six months of this year (January to June), only 1.4 million Chinese tourists visited Thailand.

Moreover, Poonpong noted that the Evergrande collapse will also affect Thailand’s export sector due to reduced Chinese purchasing power, resulting from a significant proportion of China’s GDP being tied to the real estate sector, a substantial employment source with over 62 million positions.

Raw material exports from Thailand to China, including construction chemicals and plastic pellets, are also expected to be affected. China is the number one export market for these products, accounting for 18% and 29% of exports respectively.

The construction materials are one of Thailand’s top ten export products. In the first half of this year, exports of these two products to China decreased by 20.9% and 26.9%, respectively, reported KhaoSod.

Other construction-related products such as steel, steel products, aluminium products, construction machinery, cement, and plastic products are expected to be less affected by the collapse of Evergrande as China is not the main export market. However, there may be indirect impacts on prices, particularly for steel, which is sensitive to the real estate economy.

Poonpong concluded that Thai business operators should closely monitor China’s real estate sector, as it significantly influences China’s economic recovery, which will consequently affect Thailand’s economy, particularly the tourism and international trade sectors.

As China is Thailand’s number one trading partner and the second-largest export market, accounting for about 12% of Thailand’s total export value, China’s economy significantly impacts Thai export goods, and the Evergrande collapse is significantly impacting China’s economy.