Sunday, July 26, 2009

Thai exports start to benefit from China

Beijing's massive plans beginning to bear fruit

Writer: POST REPORTERS
Published: 25/07/2009 at 12:00 AM
Newspaper section: Business

Thailand's exports to China are likely to continue to grow over the remainder of this year as massive stimulus spending by Beijing is showing clear signs of lifting consumption and demand.

Data from Kasikorn Research Center show that Thai exports to China contracted by 3.5% year-on-year in June, compared with a 10.9% decline in the previous month. While the contraction continued, June featured the fifth consecutive month of month-on-month growth, at 11.8%, compared to 1.9% in May.

The improvement in June narrowed the first-half contraction in export value to 18.2% year-on-year from 27.6% in the first quarter.

Imports from China to Thailand have improved slightly, from a 30.7% year-on-year contraction in May to 27.1% in June, resulting in a 28% decline for the first half.

The stimulus measures introduced by the Beijing government contributed to 7.9% growth in the Chinese economy in the second quarter of this year, which had been slowing since the third quarter of 2008 and apparently bottomed out at 6.1% in the first quarter of this year.

China's industrial production in June expanded by 10.7% from a year earlier, compared with 8.9% in May. Investment in fixed assets in urban areas grew 35.3%, resulting in increasing demand for imports of materials, intermediary goods, and capital for the production and investment.

China has stepped up its imports of copper, aluminium and iron, which are benefiting from state construction projects, while imports of materials and intermediary goods such as plastic pellets and synthetic rubber are also gaining from the expansion of industrial production.

The expansion of China's heavy industry is playing a key role in accelerating the growth of the investment sector, while steadily rising vehicle sales volume resulted in 17.7% year-on-year growth in the first half of the year. At the same time, prices of consumer products have increased in line with demand.

Light industry including textiles and household appliances expanded 8.2% in the first half of the year, benefiting from government programmes to help rural consumers acquire appliances. The industry is also being helped by a government decision to increase export tax rebates and credit assistance for exporters.

Among the imports showing improving growth in June were plastic pellets (up 3.5% year-on-year against a 13% shrinkage in May), copper (up 64.6% from 20.2% in May) and aluminium (up 123.5% from 78%). Iron ore imports in June declined 12% decline in June, compared with 19% in May, while synthetic rubber imports were down 7.3%, an improvement from 12% in the previous month.

Thai exports to China with higher growth rates included chemical products, cassava products, electrical and electronic appliances and parts, wood and wooden products, and chilled, frozen and dry fruits. Positive but decreasing growth figures were recorded by rubber products, and motors and electrical generators. Negative but improving growth rates were seen in computers and parts, raw rubber, plastic resins, processed oil, and chips.

Significantly, June was the first month to feature year-on-year export growth of Thai industrial goods, which account for more than 70% of all Thai exports.

Kasikorn Research Center believes Thai exports to China in the second half will improve in line with projected GDP growth of of 7.5% to 8.0%, as a result of various factors including the US$586-billion stimulus programme that began in November last year.

In addition, the Chinese government is expected to continue to relax its fiscal policy for the remainder of the year as the global economy appears unlikely to fully recover this year. Beijing is also launching other measures to assist various sectors of the economy to stimulate consumption and investment.

A steady but modest recovery in the global economy, meanwhile, is expected to improve prospects for Chinese exports, which in turn will fuel more demand for imports from Thailand and other Asian countries to make more goods.

China's exports in June contracted by 21.4% year-on-year, but the decline was smaller than in May, with a month-on-month growth rate of 4.5%, the eighth consecutive month of improvements.

Thai exports to other major markets such as the United States, the European Union and Japan also showed some improvement in June, though the contraction was still in double digits: to the US -22% compared with -35.7% in May; EU 27.4% vs -34%, and Japan -27.8% vs -30%. The improving trend of the global economy in the remainder of this year should cause Thai exports to improve as well.

In addition, the June export figures of other countries, as announced by their governments, are showing that the rates of decline are slowing. They include South Korea, Taiwan and Singapore.

Relate Search: Kasikorn Research Center, Beijing government

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