HSBC Partner Content

Corridors of power

Chinese investment in key zones gives Thai economy boost, says HSBC boss


Giorgio Gamba says Chinese FDI into Thailand is on the rise

Despite two years of disruption from the pandemic, trade and investment ties between China and Thailand are deepening. Late last year a new railway linked Kunming in Yunnan with Vientiane in Laos, just over the border from Thailand, under China’s Belt and Road Initiative (see WiC567). It is already carrying agricultural exports from provinces in northern Thailand to Chinese cities, cutting freight times by two-thirds, and will eventually connect with a high-speed track the Thais are building between Bangkok and the northeastern town of Nong Khai. In the meantime Chinese companies are some of the leading investors in zones further to the south like the Eastern Economic Corridor, a key engine for growth along the Gulf of Thailand. Of course, Thailand is also hoping to welcome back millions of Chinese tourists as soon as travel restrictions are eased.

WiC spoke to Giorgio Gamba, CEO of HSBC Thailand, for more on how the trade and investment relationship between the two countries is developing.

What are Thailand’s main exports to China?

Tourism has been one of Thailand’s major exports to China, although that has been disrupted over the last two years by Covid, of course. Agricultural goods and foodstuffs are other key exports, as well as sales of machinery, plastics and rubber.

Thailand was one of the early movers in Southeast Asia in bringing down tariff barriers in many sectors, which has fostered more trade with the Chinese over recent years. The implementation of RCEP [The Regional Comprehensive Economic Partnership, a free trade agreement among Asia-Pacific nations] also began at the beginning of this year, which will spur more activity.

Speaking of tourism: visitor numbers to Thailand were crunched by Covid, are Chinese tourists going to be important as the sector recovers from the pandemic?

There’s no doubt of the importance of tourism to the Thai economy or the contribution from Chinese visitors. And no one doubts that the economy is going to benefit from the return of Chinese tourists after the pandemic – they will play a key role in the recovery of the sector.

Perhaps the disruption of much of the last two years has brought an opportunity for Thailand to reposition itself in tourism terms too, not only for visitors from China but for those from other countries. Every business needs to be well diversified and the Thai tourism sector wants to attract a range of visitors, including first-timers from newer markets such as India. Another key strategy is targeting higher-spending tourists from around the world who value quality experiences

How about Chinese investment in Thailand? Are the Chinese constructing new railways in the country, similar to some of the other Southeast Asian nations?

In infrastructural terms there is a pipeline of projects in zones like the Eastern Economic Corridor, which is going to be one of the biggest drivers of sustained economic growth into the future. But I think it’s fair to say that infrastructure in Thailand is generally quite well developed already and that the local economy relies on the abilities of its domestic corporates as infrastructure players.

Nobody doubts that new infrastructure projects are required and that everyone is all-in on making them happen. Chinese investment is evident in some of the projects as a collaborative effort, working hand-in-hand with local partners.

One of the reasons that multinational firms are attracted to Thailand is that it already has an established transport network. It’s not like some other markets, where much of the investment is likely to have to start from scratch in greenfield projects. The existing capacity here is also a major part of the appeal to multinationals looking to set up new manufacturing hubs for the region and Chinese firms have also benefited, with activity in sectors such as electronics, automotive components and solar panels.

Can you talk a bit more about the Eastern Economic Corridor?

The EEC is located outside Bangkok and straddles the three eastern provinces of Chonburi, Rayong and Chachoengsao on the Gulf of Thailand. The Thai government developed the EEC on the back of the Belt and Road Initiative, with the ambition to enhance its eastern seaboard into a leading ASEAN economic zone. It offers a number of commercial hubs with different sector focuses.

You can see its impact in the way that suppliers and competitors are clustering in industrial parks. But another major part of the EEC’s appeal is the way that it has been built to get goods to market, with ports and railway access that benefit many of HSBC’s clients with businesses in areas such as electronics, foodstuffs and agri-exports.

HSBC has also supported the financing of some of these infrastructure projects: for example, for companies working on the port expansion at Laem Chabang and the extension of Bangkok’s sky train network.

What about the automotive industry, where Thailand has a strong reputation?

There’s been a lot of FDI in the sector in Thailand, much of it from the Japanese, in companies in automotive components businesses, as well as the carmakers themselves. Historically, most of the investment has come from Japan, Europe and the United States, but that is changing. We are now seeing more Chinese money and we expect this to continue, helped by the development of sectors like EVs (electric vehicles).

Logistics has also been expanding quickly as a services industry, which is linked to the e-commerce boom we are seeing across Southeast Asia. This isn’t just for domestic e-commerce sales: Thailand is taking on a role as a hub in the ASEAN region.

In a similar way, we are also seeing more business from clients in areas where consumer behaviour is changing fastest, like tech and e-commerce. In 2020, 72% of Thais expressed a preference for digital transactions, a higher proportion than anywhere else in ASEAN. Other countries in the region have made more headlines about their tech unicorns but the adoption of everything digital here in Thailand is higher.

So how does HSBC help companies from China do more business in Thailand?

HSBC has a track record in supporting corporate clients in Thailand in areas including construction, engineering and electronics, the automotive supply chain, and the food and beverage industries. The major Chinese corporates prefer to work with us because we have been active in the Thai market for 133 years. That brings huge experience and deep relationships, including those with the government sector and regulators.

We offer a wide range of services: financing is probably the most obvious but we are very well positioned to intermediate on a wide range of capital and investment flows because of our cross-border presence. We also launched our onshore Private Banking business earlier in 2021. Many of our Chinese corporate clients already know us from working with us in other markets as well. These are embedded advantages that differentiates HSBC as a leading international bank.

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