Slowing Chinese economy may impact Thailand’s exports, tourism and investment

Economic experts are voicing apprehension over the slowing Chinese economy, citing that the mainland’s deceleration and escalating tensions with the US could potentially affect Thailand in terms of exports, tourism, direct investment, and property.

Despite China’s economy surpassing estimates by growing 4.5% in the first quarter, it has since experienced a slowdown. The disappointing figures in terms of investment, consumption, and exports have stirred concerns.

In the initial nine months of this year, China’s GDP witnessed a growth of approximately 5.2%, implying it needs to expand by nearly 4.4% in the final quarter to meet the government’s annual growth target of 5%.

Punn Pattanasiri, an analyst at SCB Economic Intelligence Center (SCB EIC), expressed that while a growth of 5.2% might appear high, it is a decline compared to the usual 6-8% growth rate of China. He anticipates this expansion will likely decrease further in the coming year.

Pattanasiri voiced apprehension over the long-term economic impact if the ongoing economic restructuring on the mainland does not yield positive results.

KGI Asia, a leading wealth management and asset management firm in the region, echoed these sentiments. It stated that even if the full-year growth target of 5% is achieved, the Chinese economy will face challenges in the subsequent year.

KGI Asia predicts

The company’s recent 2024 Global Market Outlook report noted the importance of mitigating risks and bolstering economic momentum simultaneously. KGI Asia predicts that Beijing will set an economic growth target for next year at 4.5-5%, with the rate reaching 4.9%.

While Chinese investment in manufacturing and infrastructure could witness growth next year, investment in real estate could potentially slow, as per KGI Asia.

Moreover, the recent escalation in China-US interactions is also a cause for concern. KGI suggests that while the Chinese government’s introduction of more flexible monetary and fiscal policies might stimulate economic growth, weak property sales and a potential deterioration in China-US relations during the US election year could negatively impact investment sentiment.

Pattanasiri from SCB EIC concurs with this view, stating that a worsening in US-China relations could negatively affect exports from the mainland, particularly high-tech products.

Thailand, being a part of Beijing’s supply chain, notably in the sectors of natural rubber, wood and petrochemical products, could not evade the impact of China’s role as the factory of the world could decline.

Pattanasiri also highlighted that Thailand’s interaction with the mainland in tourism, direct investment and property could face problems given China’s significant contribution in these sectors.

KGI Securities (Thailand) reduced its overall arrival projection by 4% this year to 27.5 million and by 9% in next year to 32 million, owing to the number of Chinese tourist arrivals falling short of its estimates, reported Bangkok Post.