Sunday, August 26, 2012

Thailand must woo China FDI: Banthoon

Thailand will have to adapt to gain more from an influx of China's foreign direct investment (FDI) into Asean countries as China is now the world's second-largest economy with a 10.5-per-cent share of global GDP.

Banthoon Lamsam, president and CEO of Kasikornbank, told a seminar yesterday that Thailand must not be complacent as there are many other competitors for China's FDI within Asean.

Speaking at the seminar on the role of the baht and the Chinese yuan held by National Research Council, he said the Chinese currency now has the potential to be a major currency of the global economy due to China's huge international reserves of as much as US$3 trillion (Bt90 trillion).

Over the past 11 years, China has grown rapidly from $1.2 trillion or 3.7 per cent of global GDP in 2000 to $7.3 trillion or 10.5 per cent of global GDP in 2011.

By comparison, the US's share of global GDP fell from 30.8 per cent in 2000 to only 21.7 per cent in 2011. During the same period, Japan's share of global GDP also dropped from 14.7 per cent to 8.4 per cent.

As a result, China is now the world's second-largest economy, which continues to grow rapidly.

Banthoon said bilateral trade between China and Thailand has also expanded accordingly during the period, while China's trade with Asean was up from 4 per cent of the grouping's total to 11 per cent in 2011.

China is now the No 1 trading partner of Asean, followed by the US, Japan and Europe.

Banthoon said Thailand should also be aware that there are competitors for China's trade and FDI in Asean. For example, Chinese investors have looked at Cambodia, Vietnam as well as Myanmar as places for new investment after the minimum wages in Thailand were significantly raised recently.

Overall, China's FDI in Asean rose from $119 million in 2000 to $4.38 billion in 2011, accounting for 12.2 per cent of the total FDI in Asean countries.

For Thailand, FDI from China rose from $57 million in 2000 to about $700 million 2011. Over the past two years, Kasikornbank, for example, has had to adjust to accommodate more FDI from China,

The inflow is forecast to rise markedly over the next 5-10 years so the country will have to get ready to benefit from this trend.

Opportunities will lie in the fact that China will need to source more raw materials for factories while its domestic consumption will likely expand rapidly in coming years because it is currently only 35 per cent of China's GDP.

China's share of global GDP is forecast to rise from the present 10.5 per cent to around 22 per cent in 2025 so there will be tremendous opportunities for other countries to tap in terms of China's domestic consumption.

China also has relatively low public debt as a percentage of GDP - currently only 43.5 per cent - while its international reserves exceed $3 trillion. This makes its currency, the yuan, as the new potential reserve currency for other countries as China's role in the global economy continues to expand.

However, the yuan still has some limitations as a new currency for international trade, so it accounted for only 0.04 per cent of Thailand's international trade in 2010 and 0.25 per cent in 2011.-The Nation (August 26, 2012 1:00AM)

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