EXPERTS PLAY DOWN THE LOOMING TRADE WAR WITH THE UNITED STATES AND RISK OF HIGH DEBT
CHINA offers great opportunities to Thai small and medium-sized enterprises (SMEs) who want to sell their products via the world’s largest online shopping platform, experts said.
Those who have visited China several times during the past decade would have been left wondering at the scale and volume of the ongoing construction projects ranging from condominium buildings to mass transit system.
Thais, with the benefit of hindsight, are reminded of the Asian financial crisis of 1997 when a similar construction boom in Bangkok blew up after the Thai economic meltdown triggered a regional crisis.
Chinese authorities often explain that the new residential units would be absorbed by the high demand due to rapid urbanisation while the high speed rail between provinces and the mass transit system in big cities are a necessity to ease traffic jams.
The ambitious infrastructure projects go beyond China’s border, or along the Belt and Road Initiative which involves about 60 countries. China has offered loans to many countries, including Laos, Cambodia and Pakistan to finance high-speed rail, seaports and roads.
“Large public debt is an issue of concern, as provincial governments have been racing to build infrastructure and other projects to boost their economies, leading to debt piling up in the banking system” said Aksornsri Phanishsarn, an economics lecturer at Thammasat University, who specialises in China’s economy.
The International Monetary Fund had previously issued a warning about the rising global debt. The IMF had also warned China about debt ballooning to 234 per cent of gross domestic product (GDP) in 2017 and the vulnerability of its banking system. “So far China’s leaders have been able to manage the debt, but China’s economy is not solid as before,” said Aksornsri.
The latest development follows the looming trade war between the US and China. Some critics are worried that the potential full-blown trade war would hit China significantly. However, Aksornsri said it would not affect China much, as China’s exports to US are about 20 cent of its total exports.
Sompop Manarungsan, president at the Panyapiwat Institute of Management, shared a similar view saying that China could rely on domestic consumption in case of the escalation of trade protectionism.
Against this backdrop, China has been trying to seek new friends, especially among Asean and South Asian counties.
Speaking to The Nation, Andrew Sheng, a distinguished fellow at Asia Global Institute of University of Hong Kong, assured that debts in Asia would be manageable due to the high economic growth in the region. “China has good experience in infrastructure investment,” he said.
“Chinese people are very proud of four things; high-speed rail, online shopping , sharing economy, and cash-less society,” said Aksornsri. New businesses have led to a rising number of billionaires as well as a burgeoning middle class. She advised Thai SMEs to take advantage of this phenomenon by seeking export opportunities.
“There are 772 million Internet users of whom 650 million shop online. This is a great opportunity for Thai SMEs to sell their products using online platforms,” said Aksornsri. And China’s online trade is the world’s largest, she added.
The best way to start is to learn how to buy goods online, she said. SMEs should also learn how to use China’s social media – Wechat – and online payment system such as Alipay. She suggested that Thai businesses sell their goods on AliExpress of the Alibaba Group or JD.Com. Thai businesses should position their products as premium ones. However, it was not easy to deal with AliExpress or JD.Com, due to the stringent standards, she said.
Another way around is to try to sell their products via convenience stores such as 7-Eleven outlets in Thailand because a large number of Chinese visited Thailand every year and they often bought goods at 7-Eleven chains as the chain accepts QR code payment from China. About 10 million Chinese tourists visit Thailand each year and even if some of them liked some Thai products, their word of mouth marketing could go a long way in creating demand.
She pointed to an example of a rubber pillow brand, “Patex”, which is bought by Chinese tourists first and is now popular on JD. Com online. However, Thai businesses should protect their data and carefully choose business partners. “Be careful if someone tells you he could distribute your products across China; he cannot since China’s market is fragmented and each province has different tastes,” she added.