Chinese investment in Thailand is growing, with many interesting developments over the past year.
One of the most important is the Thai-Chinese Rayong Industrial Zone on the Eastern Seaboard. One-third of the zone was completed in 2013 and some companies have already become established there. While there are about 60 companies at present, more than 200 are expected to register within five years.
SAIC, a joint venture with CP, began production of MG cars last year and plans to use Thailand as its Asean production hub for both MGs and eco cars.
Another big Chinese company expanding in Thailand is China Mobile, which became a major shareholder in True, the third-largest telcom, by buying 18 per cent of the company last September.
China is also investing in new rail networks – from Nong Khai to the Map Ta Phut deep sea port in Rayong, which will link with China through Laos, and from Bangkok to Saraburi.
Last year, China and Thailand signed an agreement on the project, which will be Thailand’s first standard-gauge track of 1.435 metres, suitable for both standard and high-speed trains. Work is due to start on the project next month.
The new railroad connecting China to Map Ta Phut shows China’s seriousness about increasing investment in this country and certainly foreshadows increased investment by China in Thailand.
While China’s investment in Thailand has risen over recent years, it is still only about 10 per cent of total foreign direct investment. China lags well behind Japan in Thailand, which accounts for about half of all FDI.
However, Chinese investment is likely to accelerate. One of the driving factors is China’s “Go Out” policy, which encourages Chinese companies to expand their production bases to Asean because of higher production costs at home.
Another boost will come from the Maritime Silk Road, which will provide better transport and trade links among China, Southeast Asia and South Asia.
China has agreed to establish a yuan clearing bank in Thailand, and Thailand and China have agreed to cooperate across a broad range of industries.
The closer relationship between our two countries presents many opportunities for Thai companies. This was dramatically demonstrated by CP’s plan to form a joint venture with Japan’s Itochu to invest in Citic, a Chinese state-owned conglomerate.
They plan to use the holding company to invest in businesses in China and across Asia.
This cross-investment among three giant companies – Japanese, Chinese and Thai – is an intriguing development and perhaps a sign of the growing role of China and Japan in Thailand’s future.