understanding one belt, one road ... - chiang mai...

Understanding One Belt, One Road: Role of China Trade and Investment

in Greater Mekong Sub-region(GMS):A case study of Thailand.

Dr. Nisit Panthamit

[email protected]

Wechat id: nisitp9009

Nisit Panthamit, Ph.D.Director of ASEAN Studies, Chiang

Mai University, Thailand(CMU)

Contents

1

Role of China Trade and Investment

World Economic Power1.

2

.

A Case Study of Thailand3.

1. The new landscape of world economy (1) : Growth has been too slow for too long.

Due to: -restructuring of world economy, especially China’s economic transition-humanitarian disaster like Syria’s millions of refugees to surrounding countries as well as to Europe

1. The new landscape of world economy(2): restructuring in major economies

The US

• From over-expansion in financial market ( per capita GDP in the finance sector was 2.75 times as much as that in the manufacturing sector in 2007) to re-industrialization

• Artificial intelligence (AI), Robots and digital manufacturing and other strategic new industries like new energy, bio-engineering, etc.,

EU

• High-tech-oriented industrial policy

• Energy, environment protection

Germany

• Industry 4.0

Japan

• AI, application of 3D technology

Economic Growth Models: China Vs. US

2011 2012 2013 2014

Personal consumption expenditures

USA 68.88% 68.40% 68.37% 68.40%

China 36.71% 37.13% 37.26% 37.69%

Gross private domestic investment

USA 14.43% 15.55% 15.99% 16.49%

China 47.33% 46.45% 46.49% 46.04%Government consumption

expenditures and gross investment

USA 20.42% 19.55% 18.69% 18.17%

China 13.53% 13.69% 13.78% 13.54%

Net exports of goods and services

USA -3.73% -3.50% -3.05% -3.05%

China 2.43% 2.73% 2.46% 2.73%

In 2007, China’s net exports accounted for 8.8% of GDP, reaching its peak.

1. The new landscape in the world economy (3): Asia is rising and transitioning from production base to both production and consumption bases

Emerging and Developing Asia has becomes the world’s growth engine

• In recent years, Asia has contributed more than 50% of world economic growth, and China contributed more than 50% of Asia’s growth.

• In 2014, China contributed 27.8% of world’s growth, while the United States contributed 15%; In 2015, China continued to contribute more than 25% of world’s growth.

Rising Asia - Shares in world trade volume（%）

China US EUAsia（excluding

Japan）Asia（including

Japan）

1980 n.a. 11.44 43.24 17.30 23.48

1990 1.35 12.56 45.47 16.32 23.91

2000 3.52 13.52 38.45 23.45 30.11

2010 9.18 9.73 35.26 31.47 36.05

2013 10.41 9.76 33.53 34.14 37.71

Rising Asia - Shares in world FDI inflows（%）



Japan）

1980 0.11 31.27 39.33 1.08 1.59

1990 1.68 23.26 47.01 11.07 11.94

2000 2.88 22.19 49.67 11.71 12.30

2010 8.07 13.93 26.98 29.15 29.06

2013 8.53 12.92 16.96 30.18 30.34

Rising Asia - Shares in world FDI outflows（%）



Japan）

1980 0.00 37.52 42.73 2.33 6.98

1990 0.34 12.82 54.34 4.67 25.69

2000 0.07 11.49 65.20 7.92 10.46

2010 4.69 18.93 32.91 20.77 24.61

2013 7.16 23.98 17.75 23.46 33.08

Affluent financial resources in Asia

As of March, 2015, Asia’s foreign exchange reserves reached $7.8 trillion,

accounting for 2/3 of world’s total.

China: $3.73 trillion

Japan: $1.22 trillion

Saudi Arabia: $0.698 trillion

Republic of Korea: $0.358 trillion

Singapore: $0.249 trillion

Rising Asia: another evidence

Rising middle classDefinition: a range of USD10 to USD100 in PPP per capita per day.

Source: Kharas, Homi (2010): “The Emerging Middle Class in Developing Countries”, OECD Development Centre.

Numbers (millions) and Share (percent) of the Global Middle Class

Size: From 1.8 billion people in 2009 to 3.2 billion by 2020 and 4.9

billion by 2030. 85% of this growth comes from Asia.

Purchasing power: From USD21 trillion in2009 to USD56 trillion by 2030.

Over 80% of the growth in demand comes from Asia.

A new shift underway in Asia

15

World Economic Power (GDP 2014)

United States22.6%

China13.4%

Japan6.0%

Germany5.0%United

Kingdom3.8%

France3.7%

Brazil3.0%

Italy2.8%

India2.7%

Russian Federation

2.4%

Canada2.3%

Australia1.9%

Korea, Rep.1.8%

Other28.7%

Rank

ingEconomy

(millions of US

dollars)GDP growth

1United

States 17,419,000 2.4

2 China10,360,105

7.4

3 Japan4,601,461

-0.1

4 Germany3,852,556

1.6

5United

Kingdom 2,941,886 2.6

6 France2,829,192

0.2

7 Brazil2,346,118

0.1

8 Italy2,144,338

-0.4

9 India2,066,902

7.4

10Russian

Federation 1,860,598 0.6

11 Canada1,786,655

2.5ทีม่า: The World Bank

Greater Mekong Sub-region(GMS)

Guan Lei Port

Goods Loaded at

Guan Lei Port

Tourist at Guan Lei Port

ท่าเรือกวนเหล่ยGuan Lei Port

Myanmar – Laos Bridge under Construction

Myanmar Police

ท่าเรือบ้านโป่ง (พม่า)Wan Pong Port (Myanmar)

Laos Police

Wan Mom Port (Laos)

Chiangsean Port 1 (Thailand)

Chiangsean Port 2(Thailand)

Chiangsean Port 2 (Thailand)

Lanes of the commercial port of Chiang Saen port(Thailand) - Guan Lei.(China's southernmost pier)

total distance of 265 KigometersWater depth from 1.5 to 7 meters in different seasons.

VietnamLao

Cambodia

Thailand

YunnanMyanmar

Mae Sai

Mae Sa rieng

Chiang Sean

Chiang Kong

Maesod

Luang Phra Bang

Chaya Buri

Luang Nam Ta

Bo TenMeng La

Jing Hong

เชียงตุง/Chiang

Tung

เมืองลา/Muang La

TaChiLeik

Mae Sai

Chiang Khong

Chiang Rai

Chiang Mai Nan

Laos PDR

Yunnan, China

Myanmar

เChiang San

Viang Pu ka

Huay Sai

Huay Kon

Taung Gyi

Mandaley

Muze

Bo-Han

Ruli

Chaya Buri Dam

Route R3A

สะพานขา้มแมน่ า้โขงเมยีนมาร ์- ลาว

Route R3B

Route R3A

Thai-Lao Friendship Bridge no.4

Border Control Facility (Thailand)

Acccess road

Bridge

Border Control Facility (Lao

PDR)

Traffic Interchange

Composition of Bridge Structure

Intermodal Facility

R3A Economics Road Thai-Laos-China

Boten Laos Border

เส้นทาง R3A

Jing hong Gate

เส้นทางรถไฟความเร็วสูง จีน-อาเซียน

58

Why we have to understand

China role for GMS?• China is a major trading partner of Thailand.

• China's role in world political and economic

stage.

• China is fast developing policies, strategies and

goals for new releases.

• Note that Thailand trades with China less than

Malaysia, Vietnam, Singapore trade with China.

Contents

1

China of China Trade and Investment

World Economic Power1.

2

.


• For economic and

financial stability.

• For energy security

• Through the Silk Road

Strategy

60

Why “Go Global”（走出去）?

61

The investment objective of the Chinese

economic and political power.

ทีม่า : https://botanwang.com

https://botanwang.com/

62

Economic power, China Based on the Strait of Malacca has high risk

Sudan

and

Angola

Strait of Malacca

Pass

Myanmar

From Russia

Kazakhstan

and

Turkmenistan.

Iran And

Saudi

Arabia

From Canada

From

Venezuela

and Australia

Channel Japan

63

AIIB: Tools for success of the Silk Road.• World Bank: USA

• ADB –Japan

• China: President Xi Jinping is

set concept. The Asian

Infrastructure Investment

Bank (AIIB) is1. Sources of funding for

developing countries

2. Leading international reserves to

exploitation.

3. Linking transportation network

in Asia. (For trade and

investment in China).

4. Push the yuan as a major world

currencies.

5. Co-founder of 21 member

countries, 57 countries will

embark in late 2015.

Strength• Economic

-ASEAN is an important partner of China (12%)

were the major markets of China.

-As a source of raw materials such as rubber,

cassava, fruits.

-Chinese investment is very low-wage Natural

Resources.

• Energy supply gas and oil.

-More countries are Partnering with China

Challenges• Economic

– FTA-ASEAN - China's tax cuts, but

increased NTB.

– Different levels of economic

development.

• Energy

– the Middle East are vulnerable

Malacca Strait.

• Politics

– ASEAN is the strategic importance

of China and the United States.

68

China looks ASEAN as important and

Challenges

ทีม่า : http://www.ciis.org.cn/chinese/2013-11/07/content_6438775.htm

http://www.ciis.org.cn/chinese/2013-11/07/content_6438775.htm

o Relations with China (the latest).

Thailand, Laos, Cambodia, the Philippines, while

China has a problem with Vietnam, Myanmar,

Malaysia.

o Trade

-Jan - Aug 15, Chinese trade with Asia 54%

(China's trade with ASEAN, Thailand 12%, 2%).

o InvestmentAt the end of 2014, Chinese investment

(cumulative) 68% Asia (ASEAN 5.4% Thailand 0.3%).

o Financing

BSA China and ASEAN countries Using Chinese

renminbi trade with all countries.

69

Relations Between China-ASEAN

Asia54%

Africa5%

Europe18%

Latin America

6%

North America

16%

Oceania1%

Trade b/w China-other regions

The attempt to link the Silk Road to The ASEAN. In

addition, there is a marine railway.

China

China

Japan

• The railway in Laos

-Boten(Laos)- Vientiane (China).

• Indonesia (China) 16-Oct-58.

• Railway in Thailand

- Bangkok - Nong Khai (China)

– Bangkok - Chiang Mai (Japanese.

China

1


• The location is at the center of Thailand

with ASEAN. As the strategic importance

of the Silk Road on the sea.

• FTA trade cooperation in the field of

agriculture.

• Cooperation investments such as railway

eastern lines.

• Other areas of cooperation; tourism,

exchange of personnel Etc.

73

Cooperation Thailand - China today Through various partnerships as part of the "Silk Road".

ทีม่า : http://www.voachinese.com/content/indonesia-high-speed-rail-

20151016/3010652.html

Security of China in the region. The Chinese interest to dig

Kra Isthmus, Southern Thailand

Strategic "marine Silk Road"• For energy security

• To stabilize the political and

military. China's expanding

influence between the Andaman

Sea.

• To stabilize the economic security

Distance• 102 km wide and 400 meters deep and 25

meters.

• 10-year investment of 28,000 million USD.

• The fleet sailed garden together.

ทีม่า :

http://news.ifeng.com/a/20150518/43783020_0.sht

• China is spearheading a gigantic financing scheme for the engineering part of the long-coveted and Chinese-dominated project of digging a 60 mile long canal across the Kra Isthmus in Southern Thailand on the Malay Peninsula.

Reason:1. Tackling the strategic Strait of

Malacca, Indonesia, Singapore

2. China's trade will grow because of

increased shipping options.

3. Shorten the time and cost of

shipping (1200 km).

4. China and Thailand will both

benefit

Affects to other countries:

1. The Strait of Malacca is greatly

reduced. Singapore, Indonesia,

Malaysia, the company reduced

the bargaining power in the

country

2. Reduce dependence on the US

And turn to more Chinese.

3. Singapore, Malaysia and

Indonesia will lose business

interests.

4. US influence in the South China

Sea decline.

5. Thailand increased security risk.

79

China is interested to Kla Isthmus more than

Thailand because it has more benefits than

Thailand

ทีม่า : http://bbs.tianya.cn/post-worldlook-1481459-1.shtml

http://bbs.tianya.cn/post-worldlook-1481459-1.shtml

China has tightening up relationship to Thailand

• China's policy of proactive strategies. Long-term

ASEAN and its neighbors in the region. Located

in the heart of ASEAN, Thailand Build networks

with other countries in the region, Thailand is

also a longtime ally of the United States.

• The Chinese government has a policy of not

criticizing Thailand.

• Future strategic relationship Thailand - China will

be more systematic.

Thailand’s strength• Thailand is a prime location as

market base. (Vietnam as a

production base. Singapore is

finance and accounting bases).

• Thailand is a major food

manufacturer for China.

• China is a major trading partner

of Thailand, as Thailand is

China's third largest trading

partner in ASEAN.

Thailand’s Weakness• Thailand has the people with

knowledge of social science

rather than science.

• Thailand ‘s SME still lack the

knowledge to take advantage of

the Framework Agreement.

• Thailand has less skill language

with English and Chinese.

• Thailand faced by SME's cost

competitiveness of the CLMV.

81

China looks at Thai economy: Thailand is

more important.

82

In addition, Thailand is a country to invest.

1. The size of the market, high consumer

price level stable and high levels of

market opening

2. Thailand infrastructure is better than

many countries in the region.

3. The level of openness and optimism.

4. Bilateral Cooperation Thailand - China.

5. Long experience of FDI from abroad .

CLMV competitiveness

84

Market- Rising purchasing

power- Organic Growth- Connectivity

Production- Young Labor

Force- Natural

Resources

- Production Network

OpportunitiesL

K

A

Exports

Investment

CLMVT is a major potential market for Thai economy.

Myanmar

Nominal GDP $64.3 bil

Real GDP Growth(5 Year Average)

27.96%

Total Population 53.4 mil

GDP per capita $4,800

Lao PDR


Real GDP Growth (5 Year Average)

7.92%



Vietnam

Nominal GDP 186.2 bil


5.86%



Cambodia



6.95%



Source: World Bank, CIA, ASEAN

Thailand can easily access to CLMV as it is located in the center of the region.

85

86

Source: World Bank

During the past decade, CLMV economies have been growing rapidly.

Thailand and CLMV’s Population Pyramid in 2016

Source: World Bank

Thailand is transitioning to the aging society while CLMV’s labor forces are growing with younger population.

87

Thailand and CLMV’s Population Pyramid in 2050

Source: World Bank88

Thailand is transitioning to the aging society while CLMV people is younger and more vibrant.

* Exclude petroleum and petroleum productsSource: International Trade Centre

CLMV market has become more important asThai trading partners.

89

Thailand Export structure to CLMV*

Source: Bank of Thailand

CLMV market is more important in terms of Thailand’s outward investment.

90

Stocks of Thailand Outward Direct Investment (as of 2015 Q3)

Thailand’s Outward FDI in CLMV Countries


91

Food and beveragesCP, THAIBEV,

MITRPHOL, KSL, BETAGRO

CP, THAIBEV, MITRPHOL, KSL,

BOONRAWDCP CP, THAIBEV

Chemical, Plastics, Paper Products

DOUBLE A TOA

Mining and Petroleum PTT BANGCHAK, PTTEP PTT, PTTEP

Electricity

BANPU, RATCHABURI ELECTRICITY,

EGCO

EGAT

Construction SCG CK, SCG ITD, SCG SCG

Wholesale & Retail Trade

SAHAPAT CENTRAL GROUP

Financial Activities BBL, SCBBBL, SCB, BAY,KTB,

BBL,SCB, KTB BBL,SCB, BAY

Real Estate Activities DUSIT,BAIYOKECENTARA, AMATA,

PRUKSA

Others

TG, BANGKOKAIRWAYSBANGKOK HOSPITAL

TG TGTG, BANGKOK

HOSPITAL

Currently, most Thai firms investing in CLMV are large companies.

Source:

WEAKNESSES

Infrastructure shortage

Unskilled labor

Low purchasing power

High logistic cost

High electricity cost

Fair financial and banking system

Small domestic market

No marine borderline

However, CLMV still lack infrastructure and skilled labors.

92Source: Bolliger and Co.

OPPORTUNITIES

Developing infrastructure

Special Economic Zone

FDI openness policy

Production for domestic and export

Generalized Systems of Preferences(GSP)

Trans-Pacific Partnership Agreement (TPP)

Each government has promoted FDI by developing infrastructure and setting up Special Economic Zone.


THREATS

Unstable regulation

Skilled labor shortage

Language barrier

High competition

Ethnic minority conflict

Unstable regulation is the primary obstacle for doing business in CLMV.


95

Cambodia Lao PDR Myanmar Vietnam

Agro-manufacturing and Agriculture Products

Contract Farming

Processed Seafoods

Construction and Construction Materials

Housing Projects

Infrastructure Development

(Transportation,

Buildings, Electricity, Water and

Urbanization)

Textiles, Garments and Footwears

Automotive Vehicles and Repair Shops

Cars, Motorcycles

and Repair Shops

Motorcycles and Repair Shops

Animal Food

Electricity and Energy

Minerals Rich

(Natural Gas, Oil, Electricities, Mining,

Water energy)

Forestry

Agricultural Machineries

Thus, each country in CLMV has investment potentials due to untapped markets.


The OFDI from Thailand accelerated since 2012 to facilitate economic integration, particularly in regional trade flows under the AEC.

Inward FDI and outward FDI of Thailand, 2005-2014

96

Northern Thailand Economy on ASEAN context

97

Trade

Services

FDI

Labor

Capital Movement

Prefer intra-regional tradeMore Good flow across country using

cooperations and agreements provided

Increase competition, services plays more an economic driver Tourism and health care services

Competitive ability Loss make company moves out

Invest outbound

Relaxing restriction for neighboring country

Increase skill labor : language andInternational standard

More freely flow of capital, currency more votality

Entrepreneurs need to accelerate the adjustment in management costs and

exchange rate risks.

Thailand Stand Point

alwww.tanitsorat.com

Opportunities and Challenges of Thailand

Logistics Infrastructure

North – South Corridor in Northern Thailand–Chiang Kong : International Road Gateway (KM –BKK)

–Chiang Saen: Mekong River Gateway (Chiang Saen/Guan Lei)

–Mae Sod : Regional Road Gateway (Maewwadi – Mae sod)

98www.tanitsorat.com

Opportunities and Challenges

Positioning & Strategy

◦ Border Economic Special ZOne/Border Industry Zone

◦ Logistics

◦ Transportation

◦ Tourism

◦ Education/Health Care regional Hub

Risk Management

Study the regional-risk in each basis: Cross-border mobility of people

,Transnational circulation of goods&serives ,and Transnational interactions

and their results formed each transitions

99

Thailand : Opportunity

100

AEC via NORTH – SOUTH ECONOMIC • Border Trade & Contract Farming , Investment• Regional Logistics Hub• Neighbor Investment (Industrial, Agriculture, Gas Resources)• Border Industrial• Immigrant Labor• Agriculture Investment• Regional Financial & Stock Market• Tourism Hub• Heath/Education/Service Center• Port Link/Land Bridge/ Airport Link/ Rail Link

100 www.tanitsorat.com

China's richest man, Jack Ma, says it will take '30 critical years' to get fully internet-integrated includingreplacing huge companies with small business. (Photo courtesy of Government House)

Jack Ma and Prime minister of Thailand on Oct.9.2019

• Mr Ma reaffirmed the need for an "e-road", akin to the Silk Road, to help small businesses flourish.

Jack Ma said

• "In the future, no matter how small a country is [or] your business is, if you have a big heart, open mind, and embrace tech knowledge and inclusive globalisation, you can be powerful too."

• Jack Ma in ACD meeting in Bangkok, Thailand(Oct.9.2016)

• "Data will be the new resource. So the next 30 years are critical for all nations in the ACD. To Asia, it is very critical," he said.

• He recalled that few people believed Chinese e-commerce could grow rapidly due to poor infrastructure for online trading.

Q&A

Thank you

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