Alarm Bells Ring: Nearly 3,000 Thai Industries At Risk of Becoming 'Chinese Product Fronts'
SCB EIC warns Thailand's economy is shifting from a producer to merely a transit point, with significant implications for local industry.
- An analysis by SCB EIC warns that nearly 3,000 Thai manufacturing businesses are at risk of becoming mere traders for Chinese goods, potentially misrepresenting product origins to bypass tariffs.
- Thailand's economic structure is shifting from a producer to a transit country, with imports, primarily from China, growing at 10% annually since 2020—a rate faster than GDP growth.
- Key Thai industries, including steel, plastics, and automotive, are increasingly dependent on Chinese supply chains, leading to a decline in domestic manufacturing.
- This influx of Chinese goods is driven by China's economic slowdown, the rise of cross-border e-commerce, and Thai businesses focusing on low-value assembly for re-export.
Thailand's economy is facing a concerning structural shift, with nearly 3,000 Thai industries at risk of essentially becoming fronts for Chinese goods, according to analysis by the Siam Commercial Bank Economic Intelligence Centre (SCB EIC).
The research indicates that the nation's economic structure is transitioning from a producer to merely a transit point in global supply chains.
SCB EIC revealed that Thailand's imports have continuously accelerated since 2020. This trend coincides with an increasing reliance on Chinese-made production inputs across several key domestic industries.
Between 2020 and 2024, the value of Thailand's imported goods expanded by an average of 10% annually, a rate higher than both GDP growth and export values.
This surge has pushed the proportion of imported goods to GDP to 53% in 2024, its highest level in 12 years, and has contributed to Thailand experiencing a trade deficit for the third consecutive year.
This structural transformation is clearly evident in China's rise as Thailand's number one trading partner, now accounting for over a quarter of total import value.
This is partly due to critical Thai industries such as steel, plastics, and automotive sectors increasingly relying on, and becoming integrated into, China's production supply chains.
Furthermore, Thailand has become a significant destination for China's surplus goods.
This, coupled with the growing popularity of online shopping and an increase in businesses that primarily depend on imported raw materials, has accelerated the continuous influx of foreign goods, particularly from China.
The sustained acceleration in the value of Thailand's imports over recent years is attributed to three main factors:
China's release of surplus goods due to its slowing economy. The value of Chinese exports to Thailand has grown at a rate nearly four times higher than the global average.
The growth of cross-border e-commerce platforms, which have gained increasing popularity among Thai consumers. While this stimulates imports of consumer goods, the revenues generated by these online businesses often do not fully recirculate within the Thai economy.
The rise of businesses with high import content, across sectors such as construction, restaurants, services, and manufacturing (e.g., electronics, steel, and plastics). Beyond creating low added value for the Thai economy, some of these businesses may be investing in Thailand to bypass Western tariffs, leading their operations to focus on importing goods for basic assembly before re-exporting them to third countries.
SCB EIC's analysis indicates that imported goods are increasingly replacing domestically produced items, both for internal consumption and for exports.
Alarmingly, there are signals that nearly 3,000 manufacturing businesses in Thailand may be operating primarily as 'buy-and-sell' enterprises, with some potentially engaging in activities that involve misrepresenting the origin of goods.
Specifically, the analysis found that:
Domestic consumption and Thailand's export sector are becoming less reliant on domestically produced goods and increasingly dependent on imports, particularly from China. This is hindering the recovery of the industrial sector, especially for producers of steel, circuit boards, electrical appliances, vehicles, and parts.
Nearly 3,000 manufacturing businesses in Thailand might be operating as primarily 'buy-and-sell' entities or mere traders. It is plausible that some of these are involved in activities that misrepresent the origin of goods, especially in the circuit board, electronic components, automotive parts, plastics, aluminium, and electrical appliance industries.
The consequences of these trends include increased risk for Thai exporters facing stricter trade barrier measures. In the long term, Thailand's economic structure could gradually transform from a producing nation to a role as a buyer and a transit country in global supply chains, leading to a continuous decline in domestic manufacturing activity.
However, proactive government policies encompassing protection, regulation, and promotion will be crucial mechanisms for preserving the long-term competitiveness of Thai industries.
While attracting foreign investment helps stimulate economic activity, and imported goods offer businesses and consumers wider choices and price points, a growth model reliant on 'buy-and-sell' operations and activities that do not generate genuine added value domestically could become a structural weakness.
Therefore, safeguarding domestic businesses, developing proactive policies to regulate investment, and carefully screening the scope and quality of imported goods are vital mechanisms for maintaining the competitiveness of Thai industries amidst rapidly changing global trade dynamics.
