Bangkok--27 Jun--HSBC
Thailand to benefit from China’s growing import momentum
HSBC’s Global Connections report predicts growth in India and China’s imports will exceed the value of their exports within the next five years. As a major trading partner with China, Thailand is expected to benefit significantly from this trend.
The forecast is consistent with an increasing global shift whereby traditionally export-driven emerging markets are becoming global trading hubs, decoupling their previous dependency on developed markets to become important engines of global economic growth in their own right.
Mrs. Juthamas Ruangvanish, Senior Vice President of Global Trade and Receivables Finance, HSBC Thailand, said: “China and India are major trading partners with most of their neighbouring countries - not least Thailand. Substantial import growth in these two biggest Asian economies offers considerable opportunity for Thai companies to grow their international business.”
China’s growth in imports will overtake the value of its exports over the next five years, with growth rates of 5.1% and 4.7% respectively. This is because demand for imported goods and commodities will continue to grow, whilst demand for exports to developed markets will decline. At the same time, India will serve as Asia’s fastest-growing exporter/importer with annualised rates averaging 5% and 7% respectively. Specifically, China is important to Thailand as exports in YTD May this year represented 12% of Thailand's total exports — and become greater than Thai exports to the EU. China’s substantial import growth will act as a major catalyst to boost Thai exports during the second-half of this year.
Thailand’s import growth reflects a similar trend, due mainly to reconstruction efforts resulting from last year's record floods as well as new investment. According to Ministry of Commerce data, Thai exports for the first five months this year totaled 2.85 trillion baht, edging up 0.8%, while imports totaled 3.19 trillion baht, up 14.0% over the same period last year. Thai exports in May alone totaled 641.14 billion baht, up 10.7% year-on-year, while imports totaled 703.03 billion baht, up 21.4% year-on-year.
“With its export-driven economy, we remain confident that Thailand is on track for a near-term robust recovery. There is an increasing trend among major Thai companies to make use of their production bases in neighboring countries, shift production to value-added products, or focus attention on improving efficiency. In so doing, they are able to meet the challenges presented by increasing costs and competition for international trade,” added Mrs. Juthamas.
Trade Confidence
HSBC’s Trade Confidence Index shows that the short-term outlook for the global economy has stabilised with a confidence index across Asia at 113 vs 112 in October 2011. The report revealed 71% of traders globally expect trade volumes to increase or stay the same over the coming six months.
Noel Quinn, HSBC Head of Commercial Banking Asia Pacific, said: “Businesses in Asia are responding robustly to global challenges and are poised to enter a dynamic phase over the next five years. Supported by substantial import momentum in India and China, and positive trade sentiment across the region, we remain confident that Asia will continue to drive growth in the global economy.”
Intra-regional Trade
HSBC’s Global Connections reveals 10 of Asia-Pacific’s top 15 trading partners are from countries within the region, with the trend expected to gain momentum until 2026. Nine of China's 15 largest import partners, and six of its fastest-growing partners up to 2016, also come from Asia-Pacific. Similarly, the six fastest-growing export destinations for India up to 2016 are in either Asia or the Middle East.
South-south Trade
Brazil appears in the top 10 high-growth export destinations for every Asia-Pacific market in the forecast. In the next five years, Brazil is expected to become Asia-Pacific’s fastest-growing export partner and second fastest-growing import partner, with annualised growth rates of 10% and 9% respectively. Specifically, Brazilian exports of iron ore to China are forecast to increase by 11% annually up to 2016. Similarly, the report shows that Latin America’s top five fastest-growing import partners up to 2016 are India, China, Thailand, Indonesia and Singapore.
Sector Opportunities
Automobiles have been identified as a key global growth sector. In Asia, imports of cars are predicted to grow at 6% annually up to 2016. Supporting this growth, Chinese car imports are predicted to expand 12% annually up to 2016, mirroring its demographic wealth trends. India is the region’s fastest-growing car exporter, with an annual growth forecast of 13%.
Thailand’s automotive sector is also fast-growing, but in terms of both imports and exports; vehicles exports are forecast to grow by 10.05%; car accessory exports by 7.38% annually up to 2016, and rubber tyre exports by 9.91%. Imports of engines from Japan are forecast to increase by 6.86%.
Alongside its strong production base, Thailand has buoyant commodity and infrastructure sectors. Exports to China of vulcanized & non-vulcanized rubber, and raw rubber gum, are forecast to increase annually by 15.99% and 7.31% respectively up to 2016. Thailand itself imports iron and steel to support its own rapid infrastructure development and the Trade Forecast predicts Thailand’s role in supplying resources to the Asia-Pacific region is growing in momentum. Additionally, Thailand’s consumer electronics sector is substantial, increasingly innovative and successfully adding value to products. In order to take advantages of the opportunities this sector offers for international trade, businesses need to grow at around 5.00% annually over the next five years.