'Gear up' as China goes South

Economy August 23, 2014 01:00

By Sucheera Pinijparakarn
The Na

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Preparations stressed for Kingdom to be 'first choice' among Asean countries

Thailand must start thinking seriously about how to be China’s first choice among the 10 Asean countries under Beijing’s “Going South” strategy to boost trade with Asean to US$1 trillion by 2020 from $500 billion (Bt16 trillion) currently.
Speaking at a session on China and its companies in the Asean Economic Community, Chansak Fuangfu, director and senior executive vice president of Bangkok Bank, pointed out that many countries in Asean wanted to cash in on China’s trade activities.
The seminar was hosted by Bangkok Bank, The Nation, China Daily and Asia News Network, among others.
Chansak said the Thai government must do what it could to enhance trade, but Thai companies had to prepare themselves as well.
The government needs to promote use of the yuan as a trade currency, streamline the regulatory and tax systems, and encourage better Chinese-language skills.
He said that as Chinese companies increasingly moved south, competitive challenges for Thai companies would rise, so the Thai government needed to rethink its investment-promotion strategy, not only to attract foreign direct investment into Thailand but also promote Thai FDI into the region.
“Thai outward FDI needs to be coordinated, and we can learn much from the Chinese government’s ‘Going Out’ model,” he said.
The Chinese government is pursuing a new development strategy as its east coast is now too expensive for manufacturing. It has implemented Go West, Going South and Going Out policies. As part of the Going South strategy, Nanning and Kunming are the key gateways linking southern and western China to Asean.
China’s cooperative agreements with the Greater Mekong Subregion, plus bilateral relationships, have led to major infrastructure projects, including road and rail (Southern Economic Corridor).
These have contributed to trade between China and Asean growing more than nine-fold over the past decade to a projected $500 billion this year. China is now a key part of the Asean economy and Beijing wants to double trade with Asean to $1 trillion by 2020.
Chansak said Thailand was the regional hub for Chinese companies, as its low logistics costs enable them to control their AEC supply chains from here. He noted that over the past five years, Beijing had actively promoted investment overseas by Chinese companies, including into Asean, as it aims to build China’s corporate presence internationally.
China’s FDI into Asean has grown 40-fold over the past decade to more than $6 billion annually. China plans to increase its total accumulated investment in the region to $150 billion by 2020 from the current $30 billion.For Asean, “Going South” and “Going Out” are the most important strategies, as they will help make China more competitive in the long run. Chinese companies are making more mergers and acquisitions and expanding investment in Asean.
Chansak raised the example of the joint venture between Thai conglomerate Charoen Pokphand Group and Shanghai Automotive to produce right-hand-drive cars under the formerly British MG brand in Thailand.
Sarasin Viraphol, executive vice president for strategy for China at CP Group, said Asean had become an international stage for China, where it is increasing its role in technological ventures apart from automotive products and consumer electronics. But he said China should keep in mind the environmental impacts of its operations, as well as their sustainability amid limited resources.  
Wang Helin, managing director of ZTE (Thailand) Co, the local unit of a Chinese integrated telecommunication solution provider, said at the same session that the development tendencies in Asean countries were basic infrastructure and innovation in mobile and cloud solutions.Asean countries provide big potential for broadband businesses, he said, because of their high economic growth rates while broadband penetration remains relatively low. 
However, he acknowledged that Chinese companies were not familiar with communicating in English, which would be a challenge for those keen on penetrating the Asean market.