thaicables – It's Your Right to know the Truth!


leave a comment »

“74296”,”8/10/2006 3:23″,”06BANGKOK4880″,

“Embassy Bangkok”,”UNCLASSIFIED”,””,”VZCZCXRO6355


DE RUEHBK #4880/01 2220323


R 100323Z AUG 06










E.O. 12958, AS AMENDED: N/A




1. Summary: In its efforts to manage globalization and competition,

Thailand has welcomed Chinese trade and investment. China in turn

has responded with well-connected companies utilizing government

incentives to invest. Both countries extend attractive policy

measures to encourage this trend. Chinese multinational companies

find attractive Thailand\’s mature domestic market, similarities in

culture and – until recently – stable political environment, which

local observers believe primes it as a major outlet to reduce

China\’s rapidly expanding trade surpluses and foreign exchange

reserves. However, while some in Thailand welcome China as just

another source of investment to raise overall market

competitiveness, others fear that Chinese companies may possess

unfair advantages from being closely aligned with the PRC

government. Spurred by Beijing\’s \’Go Abroad\’ policy, large Chinese

state-owned enterprises can count on their government-sanctioned

financial support. End summary.


2. In recent years Thailand has aggressively targeted China as a

trading partner and as a growing source of foreign investment,

although local Thai observers do not see any favoritism on the part

of the RTG. Mr. Charas Chitkittichamras, head of the China desk at

Thailand\’s Board of Investment, considered the increased attention

towards China a necessary and balanced response commensurate to

China\’s economic clout. Furthermore, Dr. Deunden Nikomborirak,

research director at the Thailand Development Research Institute,

viewed China only as one among many participants in Thailand. She

emphasized the benefits of greater competition among all foreign and

Thai companies towards increased efficiency and lower prices.


3. Both countries actively promote this development. For instance,

Thailand\’s Board of Investment (BoI) has created a special China

desk to facilitate mutual FDI. Moreover, rather than relying solely

upon agreements with Beijing, the BoI has targeted individually 11

southern Chinese provinces for direct cooperation in the private

sector. This initiative includes the establishment of a

Thailand-China Business Council in each of those selected provinces.

Concomitantly, China has restructured its Thailand embassy to

encourage Chinese investment. According to Ms. Hu Yan, a Chinese

businesswoman with close connections inside the Chinese embassy in

Bangkok, China\’s diplomatic corps only engaged in political or

consular activities until the 1990s. In the last 10 years, however,

the Chinese Ministry of Commerce has increased its presence in

Thailand. Aside from supplying some basic informational and legal

support, it created the Chinese-Thai Enterprises Association in 2002

as the official grouping of Chinese companies. Hu noted these

measures correspond to Beijing\’s overall engagement with ASEAN

countries, where Thailand is the largest destination for Chinese

investments. For example, she noted the 3rd China-ASEAN expo later

this October in the Chinese city Nanning, to which she claimed

responsibilities for handling Thai delegates\’ travel arrangements.


Chinese investors praise Thailand



4. Chinese investors interviewed by Econoff unanimously agreed that

Thailand is particularly well-suited for Chinese companies. Along

with a more mature domestic market, they felt Thailand offers better

production sourcing and infrastructure than most other Southeast

Asian nations. Ms. Jian Jun of textile and chemical manufacturer

China Worldbest Group, a Shanghai-based SOE, also mentioned

Thailand\’s advantages as a base for greater access to export

markets. Finally, the large ethnic Chinese community often acts as

a springboard into the market. According to Mr. Milton Osbourne at

the Lowry Institute in Australia, at least 60 percent of Thai

parliamentary MPs have Chinese ancestry, with some estimates upwards

of 90 percent. \”We like Thailand because the Thais are unbelievably

friendly and kind, probably because of their Buddhist beliefs,\”

added Mr. Wang Yinfei, managing director of China State Construction

Engineering company.


5. Notwithstanding Thailand\’s current political uncertainties, all

the Chinese investors interviewed considered the country as

generally stable, with mostly consistent economic policies. No one

denied that the current conditions have caused short-term

difficulties to their business. For example, Chinese businesswoman

Hu revealed that the Chinese premier was originally scheduled to

arrive earlier in April this year to announce upwards of USD 5

billion dollars in loans to the Thai government, but canceled the

trip due to the political protests at the time. Chinese companies

would in turn receive much of these loans to invest in Thailand.

Not surprisingly, all said they would like to see a continuation of

caretaker PM Thaksin\’s government, but maintain confidence that any

administration would continue liberal trade and investment policies.


Chinese SOEs to China: Show me the money!



6. These conditions have also made Thailand an ideal destination for

China\’s \’Go Abroad\’ (Zou Chuqu) investment strategy, which Chinese

businessmen say offers incentives for Chinese state-owned

enterprises (SOEs) to invest in other countries. Mr. Xu Genluo,


BANGKOK 00004880 002 OF 003


general manager at Hangzhou-based Holley Group, explained the five

priorities of this policy: 1) Relieve the pressures to revalue the

Chinese currency; 2) Avoid certain export restrictions on Chinese

products; 3) Reduce China\’s trade imbalance with other countries by

diverting manufacturing; 4) Gain global management and technological

skills; and 5) Diversify company investments.


7. The \’Go Abroad\’ policy thus coordinates significant Chinese

government involvement in financially supporting its outbound SOEs.

Xu stated that his own company derives significant direction and

financial support from the government, including a direct grant for

a $100 million dollar electric meter factory in Thailand. Xu did

not specify the source of the grant, only stating that they were

given to ten specially selected Chinese companies. Jian also spoke

of regular consultations and business ceremonies held within the

Chinese embassy compound. (Note: During interviews with Econoff,

Chinese businesspersons all either appeared to have just come from

or prepared to depart for meetings there. It is possible the

Chinese embassy either wanted to ensure adherence to certain talking

points or to discover the substance of the interviews. End note.)

In addition, Hu recollected that some of her friends in Chinese

banks were mandated by their government to approve a certain number

of loans for outbound investments each year. She asserted some of

those loans offered \”virtually no interest\” for borrowers, adding

that Chinese SOEs are also exempt from corporate taxes on their

overseas earnings.


Getting too much help from China?



8. Further blurring the distinction between Chinese businesses and

government, Hu also emphasized that only Chinese SOEs are afforded

those policy incentives. In contrast, privately-owned Chinese

companies are generally prohibited from going abroad. Officially,

only SOEs are allowed into the 69-member Chinese-Thai Enterprise

Association. There are only two exceptions, including Hu\’s small

tourism and air shipping company. She said the Chinese Ministry of

Commerce only allowed her company to bypass those rules because of

her extensive personal relationships with the Chinese embassy in



9. In addition to reducing its foreign reserves and trade

imbalances, Chinese investment policies can help its SOEs gain

advantages over its private competitors in Thailand. For example,

Charas of Thailand\’s BoI suspected that the Chinese government

financially underwrites low bids to gain access to the Thai market.

He considered this policy to be an extension of Chinese soft power

policies. Nonetheless, Charas did not consider these measures

financially large enough to significantly undermine genuine

competition, especially since most Chinese companies are still minor

players in Thailand.


10. However, Jian of China Worldbest Group, a Shanghai-based SOE,

portrayed a far more distant relationship between Chinese businesses

and government. Acting also as president of the Chinese-Thai

Enterprise Association, she asserted that Worldbest received no

money from the Chinese government, dismissing the notion as an

inefficient allocation of public funds. She reiterated Chinese

government statements that China has allowed the market to

completely determine a company\’s viability. For Jian, even the

concept of SOEs being \’state-owned\’ belies the reality that

companies are now publicly owned, with the government as only one

shareholder. She theorized the dominance of Chinese SOE investors

as a natural result of China\’s relatively nascent entrance into a

market economy, as larger companies with resources to invest

overseas tend to have SOE origins.


11. Jian also defends against the notion that China is too reckless

with its outbound FDI. For instance, she gave evidence of

market-driven investment decisions, noting their careful risk

assessment since 1998 before opening manufacturing facilities in

Thailand in 2001. She explained that Worldbest wanted to have

better access to the local market and export position, but also

stressed the high quality of Thai talent in assisting their research

and development.


12. Charas agreed with most of Jian\’s market-based rationale. He

noted that most of the Chinese companies have been profitable, apart

from some minor investors in products and retail services. Aside

from telecommunications, most of the larger investments and service

trade in construction have moved into Thailand cautiously. Those

Chinese companies that have failed suffered from a limited

understanding of Thai tastes, rather than self-inflicted wounds to

placate Beijing\’s foreign policy mandates. For instance, Charas

imparted one anecdote on ceramics from Jingdezhen, China\’s most

famous town for such wares. Chinese investors failed to realize

Thai buyer\’s appreciation for professional presentation and often

displayed otherwise quality wares amassed on the ground. This

alienated Thai clients seeking ceramics for both small- and

large-scale home improvement projects.


13. Comment: Thus far it appears Thai observers considered the

advantages of Chinese investment outweigh any potential fairness


BANGKOK 00004880 003 OF 003


issues. While they understand that Chinese companies have close

relationships with the PRC government, none of the interlocutors has

indicated that China has used its increasing investments for

political leverage. Even Chinese investors like Hu and Xu were

candid regarding their own business-government intimacy, appearing

not to find such support unfair. With China\’s GDP rising 10.3

percent and 11.3 percent in the first and second quarters of 2006,

expect China to increase its direct incentives to motivate its SOEs

to \’Go Abroad\’, especially as China is eager to avoid the various

economic pressures caused by its ascendant economy. End Comment.




Written by thaicables

July 13, 2011 at 5:12 am

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: