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Business trends

Spurred by trade war, Chinese investment in Thailand skyrockets

Midea plans largest overseas factory following relocation by tiremakers

Chinese direct investment in Thailand jumped nearly five times to 262 billion baht in 2019 from the previous year, making China the kingdom's biggest foreign investor for the first time. (Nikkei montage)

BANGKOK -- The Washington-Beijing trade war has spurred Chinese investors to relocate their production bases to Southeast Asia, a trend that has particularly benefited Thailand.

Chinese direct investment in Thailand jumped nearly five times to 262 billion baht ($8.6 billion) in 2019 from the previous year, according to the Board of Investment, making China the kingdom's biggest foreign investor for the first time.

The latest example is Midea Refrigeration Equipment Thailand, a local unit of Chinese electric appliance manufacturer Midea Group, which on Jan. 14 announced it bought 208,000 sq. meters of industrial land in Chonburi Province to develop its largest production facility outside China.

The U.S.-China trade war has brought about changes in supply chains in various sectors and products. For Thailand, a major industrial hub in Southeast Asia, the trade spat has worked in its favor and drawn in foreign investment.

Thai exports fell in 2019 for the first time in four years, the government said Wednesday. Exports to China decreased 3.8% to $29.1 billion. Companies are believed to be buying less parts and materials for their Chinese production hubs. But analysts believe that when these factories that have relocated from China ramp up production, Thailand's exports could benefit and recover.

Jitti Tangsithpakdi, president of the Thai-Chinese Chamber of Commerce, said the organization has witnessed a flood of Chinese investment into Thailand over the past two years as mainland investors sought to avoid higher U.S. tariffs, helped by a clear Thai policy to attract Chinese businesses.

"We have seen a rise in Chinese factories here in Thailand over the past few years and we expect to see more and more Chinese move in this year," Jitti said. In particular, he expects to see more high-tech companies set up production bases in the country.

According to Thailand's Board of Investment, total direct investment applications from China, excluding Hong Kong, last year far exceeded Japan's 73.1 billion baht. Japan was Thailand's biggest investor in 2018.

Amata Corp., a major developer of industrial zones, said its China-dedicated industrial park in the country's much-promoted Eastern Economic Corridor is now home to more than 100 factories.

Tiremakers were the first industry to feel the heat of the U.S.-China trade war, which pushed U.S. import tariffs on Chinese tires higher, prompting companies to relocate, according to a Thai Trade Center report.

Major tiremaker Shandong Yinbao Tyre Group has started building a factory in the economic corridor, while Hong Kong-listed Prinx Chengshan also began construction on a $300 million factory, its first overseas plant, in October.

Shanghai-listed Shandong Linglong Tire is expanding capacity at its Thai joint-venture facility, while Shanghai Huayi has started a production line to make truck tires. Most of the tires produced by Chinese players in Thailand are exported to the U.S., the world's biggest importer.

"It is a win-win situation," said a senior official at the Thai Rubber Association, adding that Thailand is the world's biggest producer of natural rubber. "The relocation helps Chinese tiremakers lower production costs, as Thailand has plenty of rubber, while rising rubber demand from Chinese factories helps prop up Thai rubber prices," the official said.

The Kasikorn Research Center, a Thailand-based think tank, forecasts that Chinese investment may increase Thai tire exports to the U.S. by 19% to more than $2.5 billion this year.

The Thai-Chinese Camber of Commerce's Jitti said the organization expects even more Chinese companies to move into Thailand this year, with the government holding roadshows focused on attracting Chinese investors.

The Board of Investment has targeted Chinese cities that have thriving high-tech industries and plans to hold meetings with top executives of several companies, including telecom equipment manufacturer Huawei Technologies and electric car maker BYD. Thai officials plan to meet executives from 400 companies in Zhejiang province, south of Shanghai, including Futong Group, another telecom equipment producer.

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