Chinese Studies
2013. Vol.2, No.1, 52-60
Published Online February 2013 in SciRes
(http://www.scirp.org/journal/chnstd) http://dx.doi.org/10.4236/chnstd.2013.21008
52
The Economic Relations between China and Thailand under
the Context of CAFTA: An Assessment
Shen Hongfang
Research School of Southeast Asian Studies/Faculty of International Relations/
Center of Southeast Asian Studies, Xiamen University, Xiamen, China
Received November 9th, 2012; revised December 9th, 2012; accepted December 16th, 2012
The bilateral economic relations between China and Thailand have unprecedentedly increased since the
signing of China-ASEAN Free Trade Agreement (CAFTA). This paper describes the rapid economic re-
lations between China and Thailand from the perspectives of bilateral trade and investment as well as
other forms of economic cooperation within the latest one decade, and elaborates the spectacular features
of Sino-Thai bilateral economic ties in comparison with ASEAN as a whole and the other ASEAN mem-
ber countries. In addition to explore the driving factors in boosting these two countries’ economic rela-
tions, the paper also explores the problems that exists since the two countries’ economic exchanges are as
matter of fact under a framework of “South to South” type that embrace inevitably the week pointes such
as lacking of complementarities and the others, the effect of free trade pact of “earlier heaviest” concluded
by Sino-Thai government since 2003 as an experimental arrangement of CAFTA will be revaluated.
Keywords: Sino-Thai Economic Relations; CAFTA; Assessment
Introduction
The last decade has witnessed rapid expansion of Sino-Thai
bilateral economic relations which was unprecedented in the
history of economic exchanges between the two countries as-
cribing to the signing of China-ASEAN Free Trade Agreement
(CAFTA). The three agreements signed attaching to CAFTA
have been the driving forces to the expansion of the two coun-
tries’ economic exchanges, namely, the Agreements on Trade
in Goods, the Agreement on Trade in Services, and ASEAN-
China Investment Agreement which were signed on 2004, 2007
and 2009 separately.
Owing to the multifarious positive factors, Thailand has be-
come one of most active participants among the other ASEAN
member countries to take advantage of this free trade deal, even
though the country has been undergoing political instability
since Thaksin was overthrown by coup in September 2006. In
addition to follow the normal schedule of tariff reduction of
CAFTA, Thai government signed with Chinese government an
agreement on accelerating tariff elimination under the Early
Harvest programme over a two-year period, and to be continued
afterward. Although “earlier harvest” of CAFTA has caused
some problems to the farmers of both sides, the Thai govern-
ment is still firmly committed to the deal. It has formed a joint
working group with China to survey the problems and obstacles
in importing and exporting agro-products of the two countries.
Thai Minister of Agriculture and Cooperation signed with
China’s General Administration of Quality Supervision a
memorandum of understanding (MOU) in November 2009 with
an aim to provide more opportunities for traders in the two
countries to market their farm products1. The expansion of free
market access of agro-products between the two countries has
been merited as “WTO-plus”2.
In addition to the booming trade, mutual investment of both
sides is growing in a fast space, especially with the increasing
flow of Chinese investment into Thailand, the model of “two-
way” investment is coming into being. Some other types of
economic cooperation, such as tourist cooperation and trade in
service as well as financial cooperation (or coordination) are
also vital to Sino-Thai bilateral economic growth and develop-
ment.
Complex driving forces and multifarious factors are contrib-
uting to the gaining momentum of China’s growing economic
contacts with Thailand, such as the governments’ supporting
measures. The two governments have set up clear policies to
strengthen their bilateral ties. Many joint meetings of high-
ranking trade representatives of the two countries were being
organized in exploration of market access of both sides.
Meanwhile, trade exhibitions for Thai products have also been
held in many cities and places in China. Moreover, the closing
ties between prominent personalities and institutions of the two
countries play also an important role in promoting the bilateral
economic exchanges. The signing of the second five-year Joint
Action Plan on Thailand-China Strategic Cooperation for 2012-
2016, the Memorandum of Understanding (MOU) on Agricul-
tural Trade Cooperation, and a five-year development plan for
2012-2016 under the Agreement on Expanding and Deepening
Bilateral Economic and Trade Cooperation during Thai Prime
Minister Yingluck Shinawatra’s visit to China from 17 to 19
April 2012 will be no doubt driving forces to the two countries’
economic expansion.
Nevertheless, since the two countries’ economic exchanges
1Thai-Chinese Trade in Agricultural Goods Contributing to Economic Rela-
tions between ASEAN and China, (23/12/2009)
http://thailand.prd.go.th/view_inside.php?id=4655.
2To achieve free trade of agro-
p
roducts in WTO is very difficult, since it
relates to the interests of the majority of farmers.

SHEN H. F.
are as matter of fact under a framework of “South to South”
type that embrace inevitably the week pointes such as lacking
of complementarities ascribing to the major import and export
commodities are overlapped though the overall value of the
bilateral trade are expanding. Besides, the figures of Thai direct
investment to China in this one decade is appearing smaller in
comparison to that of Singapore, Malaysia, Indonesia and Phil-
ippines for some complicated reasons.
This paper is divided into four sections. Section 1 is the in-
troduction of the whole paper. Section 2 describes the overall
situation of Sino-Thai economic relations in the latest one dec-
ade from the perspectives of bilateral trade and investment as
well as other forms of economic cooperation under the CAFTA,
and elaborates the spectacular features of Sino-Thai bilateral
economic ties in comparison with ASEAN as a whole and the
other ASEAN member countries. Section 3 explores the driving
forces and positive factors in boosting the expansion of these
two countries’ bilateral economic relations, and in particular,
the efforts of the two governments in promoting trading of
agro-products as an experimental arrangement of CAFTA will
be under evaluated, and the major policies and measures
adopted by both sides are elaborated. Section 4 explores the
problems that have existed in the course of economic inter-
change, for example, some overlapped key import and export
commodities caused less complementarity but strong competi-
tiveness in the both domestic markets and even international
markets will be mentioned, and the major constraints in imped-
ing the bilateral direct investment are also quest. Simultane-
ously, it predict future trend of the two countries’ economic
relations under the development of CAFTA and encouraged by
the Chinese and Thai official and non-official sectors.
Overall Situation of Sino-Thai Economic
Relations under the CAFTA and the Features
The 21st century has witnessed significant expansion of
Sino-Thai bilateral economic relations that extended from trade
in goods and to trade in service, mutual investment and finan-
cial coordination as well as the other forms of economic coop-
eration, despite changes in the international situation and their
own domestic conditions.
Trade in Goods Has Greatly Increased and the
Structures of Imports and Exports Have Diversified
Trade in Goods Has Greatly Increased under CAFTA
According to China’s official figures, the trend of bilateral
trade in goods between China and Thailand from 2002 to 2011
have been keeping a momentum of up growing even though the
Kingdom of Thailand has undergone in one time and another
the political disturbance.
Table 1 shows that the total value of yearly bilateral trade in
goods of the two countries has expanded substantially from US
$85.61hundred million in 2002 to US $577.9 hundred mil- lion
in 2011, with an increase of almost 6.75 folds within al- most
one decade. Although global economic recession rooted from
American mitigated crisis affected heavily the trade in value of
the two countries in 2009 that caused shrinkage by 7.24% on
the year, it restore in the following year with growth rate of
38.73%, reaching to US $529.56 hundred million. The overall
value of bilateral trade has continued to grow in 2011, reached
to US $577 hundred million, a growth rate of 9.13%.
The trade expansion of the two countries under the CAFTA
has been over speed in comparison with the trade between
China and ASEAN as a whole except the year of 2007, 2009
and 2011. China ranked second after the Japan in Thai’s trading
partners according to Thai Customs statistics of 2011, and
China is Thailand’s largest export market and second-largest
source of imports, and Thailand has ranked 15th in China’s
foreign trade partners owing mostly by the “zero tariff” prefer-
ential policies related to CAFTA have effectively boosted the
trade between China and Thailand3.
Table 2 shows that Thailand enjoys trade surplus in from
2001-2010 according to Chinese figures. Along with the ex-
panding of Sino-Thai bilateral trade, the value of trade surplus
on the side of Thailand is also increasing from US $2.38 billion
in 2001 to US $13.45 billion in 2010. Thailand was locked only
in a trade deficit with China amounting to US $3.52 billion in
2011, while exports from Thailand to China were US $27.13
billion, and imports were US $30.66 billion4. However, the
revised figure of the overall trade value of the two countries
amounted to US $64.7 billion for 20115.
The Structures of Imports and Exports of Both Countries
Have Diversified
Affected by the deepening of “intra-product specialization”
led particularly by MNCs and TNEs under economic globalize-
tion and regionalization, the trade structures of China and
Thailand have undergone tremendous changes for the latest
decade characterizing with machinery, intra-industrial goods
containing electronic products, parts and intermediate goods as
the major exports and imports. In other word, a large part of
trade in PCAs (parts, components and accessories) is of the
intra-firm variety that constitutes the major part of the foreign
trade of the two countries.
Whereas, the trade structures between China and Thailand
have manifested particularities for not only diversifying, but
also overlapped with the feature of horizontal division of labor
that have diverted from the old pattern that agriculture-based
products constituted the major part of China’s imports from
Thailand, while textiles and garments, iron and steel products
and chemical products were China’s major exports to Thai-
land6.
In 2010, Thai Customs figures showed that top 9 export
products valued over US $5 hundred million from Thailand to
China that constituted 73.5% of Thai export trade value to
China were Automatic data processing equipment and parts,
Natural rubber, Chemical products, Plastic products, Rubber
products, Cassava products, Refined oil, Electronic integrated
circuits, and Wood and wooden products. At the same time,
there were 13 import products from China to Thailand that over
3The revised figure showed that the trade value of the two countries hit 64.7
billion US dollars in 2011. China Daily/Asia News Network: China, Thai-
land enhance strategic relationship.April 18, 2012.
http://news.asiaone.com/News/AsiaOne%2BNews/Asia/Story/hA1Story201
20418-340515.html.
4http://countryreport.mofcom.gov.cn/record/view110209.asp?news_id=277
51.
5The government Public Relations Department.
http://thailand.prd.go.th/view_news.php?id=6243&a=2.
6During the pre-crisis period of 1988-1996, Thailand’s proportion of ag-
ricultural exports to its total exports to China stood between 48 and 71
percent. Sompop Manarungsan, Thailand-China Cooperation in Trade,
Investment and official Development Assistance, p. 296.
http://www.ide.go.jp/English/Publish/Download/Brc/pdf/01_thailandandchi
na.pdf.

SHEN H. F.
54
Table 1.
Sino-thai bilateral trade in comparison with trade of sino-ASEAN* (Value: hundred million US $).
Year Total trade value of China
and Thailand Growth (%) Total trade value of China and ASEAN Growth (%) In China and ASEAN trade (%)
2002 85.61 - 547.67 - 15.63
2003 126.55 47.82 782.52 42.88 16.17
2004 173.43 37.04 1058.80 35.31 16.38
2005 218.12 25.77 1303.70 23.13 16.73
2006 277.27 27.12 1608.40 23.37 17.24
2007 346.38 24.93 2025.08 25.91 17.10
2008 411.53 19.10 2311.17 14.13 17.85
2009 381.70 −7.24 2130.11 −7.8 17.92
2010 529.56 38.73 2927.76 37.45 18.08
2011** 577.90 9.13 3628.50 23.93 15.93
Note: *This table is constructed by author; **Preliminary figure; Sources: Statistics are from Thai Ministry of Commerce, Thai Customs and China Customs. Source: Eco-
nomic and Commercial Counselor’s Office of the Embassy of the People’s Republic of China in the Kingdom of Thailand, “Sino-Thai Economic and Trade Cooperation
2011” http://th.mofcom.gov.cn/aarticle/zxhz/hzjj/201111/20111107835309.html; Wang Yu-zhu, The Impact of CAFTA on China-ASEAN Relationship: An Evaluation
from Strategic perspective, Southeast Asian Affairs No.1, 2012.
Table 2.
Trade figures of China and Thailand (2001-2011) (Value: hundred million US $).
Year Total Growth (%) Export Growth (%) Import Growth (%) Balance
2001 70.5 6.4 23.4 4.2 47.1 7.6 −23.8
2002 85.6 21.4 29.6 26.6 56.0 18.9 −26.5
2003 126.6 47.8 38.3 29.4 88.3 57.5 −50.0
2004 173.4 37.0 58.0 51.6 115.4 30.7 −57.4
2005 218.1 25.8 78.2 34.8 139.9 21.2 −61.7
2006 277.3 27.1 97.6 24.9 179.6 28.4 −82.0
2007 346.4 24.9 119.7 22.6 226.6 26.2 −101.0
2008 411.5 19.1 155.2 30.3 256.3 13.2 −101.1
2009 381.7 −7.4 133.2 −14.7 248.5 −2.9 −115.2
2010 529.6 38.7 197.6 48.3 332.0 33.6 −134.5
2011* 577.9 9.1 306.6 54.9 273..1 −17.8 33.5
Note: *Preliminary figure; Source: Statistics from 2001 to 2010 from China Customs, cited from “Sino-Thai Economic and Trade Cooperation 2011” from website of
Economic and Commercial Counselor’s Office of the Embassy of the People’s Republic of China in the Kingdom of Thailand. November 17, 2011.
http://th.mofcom.gov.cn/aarticle/zxhz/hzjj/201111/20111107835309.html; 2011 figure from Thai government Public Relations Department.
http://thailand.prd.go.th/view_news.php?id=6243&a=2.
the value of US $5 hundred million. These were Computer
equipment and parts, Electrical equipment and spare parts,
Household appliances, Mechanical equipment and spare parts,
Chemical products, Iron and steel products, A variety of ma-
chine manufactured goods, Textile, Electronic integrated cir-
cuits, Metal products, Other metal ore and base metal products,
Fertilizer and pesticides, Plastic products. All these 13 catego-
ries of products constituted overall value of 74.6% of Thai’s
imports from China7.
vest Agreement between Thai government and Chinese gov-
ernment in January 2004. In addition to follow the normal
schedule of tariff reduction of CAFTA, the Early Harvest pro-
gram has accelerated tariff elimination und over a two-year
period that embrace fruits and vegetables lines of products un-
der the customs tariff schedule code of 07 and 08 that include
live animals, meat and other edible animal parts, fish products,
dairy products, fowl eggs, live trees, vegetables and fruit, and
edible nuts. The two countries had also agreed to accelerate
tariff reduction on two addition products, anthracite and coal
residue. This process began in January 2004 and by January of
2006, and to be continued afterward8.
Tables 3 and 4 listed “top 10” import and exports products
of the two countries with an aim to have a better understanding
the structures of trade in goods of the two countries.
The spectacular characteristics of Sino-Thai bilateral trade
which is differed from that between China and ASEAN other
member countries is that the trade of agro-products has been
greatly expanding contributing to the signing of the Early Har-
Since then, both sides have a great access of agro-products to
8Agreement between the Government of the Kingdom of Thailand and the
People’s Republic of China on Accelerated Tariff Elimination under the
Early harvest of the Programme of the Framework Agreement on Compre-
hensive Economic Cooperation between ASEAN and China.
htt
p
://www.aseansec.or
g
.
7http://www.mofcom.gov.cn/aarticle/i/dxfw/cj/201105/20110507556587.ht
m
.

SHEN H. F.
Table 3.
Ten major exports of Thailand to China, 2010 (Value: hundred million
US $).
Items Value Growth
Automatic data processing equipment and parts 50.37 16.40
Natural rubber 24.46 57.4
Chemical products 17.90 31.7
Ethylene and other polymers 16.32 50.8
Rubber products 14.12 80.12
Cassava products 11.56 46.2
Refined oil 8.59 29.2
Electronic integrated circuits 8.07 9.72
Wood and wooden products 6.43 60.01
Other electrical equipment, components 4.75 41.59
Source: Thai Ministry of Commerce, cited from “Sino-Thai Economic and Trade
Cooperation 2011” from website of Economic and Commercial Counselor’s
Office of the Embassy of the People’s Republic of China in the Kingdom of
Thailand. November 17, 2011.
http://th.mofcom.gov.cn/aarticle/zxhz/hzjj/201111/20111107835309.html.
Table 4.
Ten major imports Thailand from China, 2010 (Value: hundred million
US $).
Items Value Growth
Computer equipment and parts 33.70 22.2
Electrical equipment and spare parts 32.20 31.5
Household appliances 21.42 30.0
Mechanical equipment and spare parts21.37 53.4
Chemical products 16.82 47.0
Iron and steel products 10.50 129.7
manufactured goods 7.93 37.6
Textile 7.85 47.6
Electronic integrated circuits 6.44 85.8
Metal products 6.38 34.5
Sources: same as Table 3.
their counterpart markets. Presently, Thailand has become
China’s ninth largest import source for agricultural products,
and tenth largest export market of China’s agricultural products.
The overall trade value of agro-products of the two countries
increased 4.8 folds in 10 years, reached to US $3.68 billion, and
the average annual growth rate is 21.5%9. Thai rice and fruits
are well known to the Chinese citizens and become their favor-
ites. Table 5 provides the information that the export value of
four major Thai original products to China’s market within a
decade from 2001 to 2010 have greatly increased.
It has all the reasons to trust that Sino-Thai bilateral trade
will continue to grow into a higher level as the two countries
has signed joint action plan of strategic cooperation and the
five-year plan of expanding trade and economic cooperation
during Thai Prime Minister Yingluck Shinawatra’s visit to
China from April 17-20, 2012. The Chinese premier Wen Jia-
bao proposed expanding bilateral trade to 100 billion US dol-
lars annually before 2015 and enhancing cooperation in ocean,
telecommunication, technology, energy and agriculture10.
Chinese President Hu Jintao also urged the two sides to ob-
serve the guidance of the newly signed joint action plan of stra-
tegic cooperation and the five-year plan of expanding trade and
economic cooperation when he met Thai Prime Minister
Yingluck Shinawatra in the Great Hall of the People on April
18, 201211. Both sides pledged to boost bilateral cooperation in
light of the poor state of the global economy and signed a series
of deals covering, among other sectors, agriculture and trans-
port and elevated relations to a comprehensive strategic part-
nership.
Mutual Investment Is Becoming the Main Component
of Sino-Thai Bilateral Economic Cooperation
In addition to the booming of the bilateral trade, cross in-
vestment of the two countries has also become the main com-
ponent of bilateral economic cooperation in spite of Thailand
was being affected by the 1997 financial crisis for about five
years till 2002, and both sides have undergone some other tor-
tures such as the avian flu in 2003, the global economic slump
in 2005 and world economic recession caused by US subprime
mortgage crisis since 2007.
According to China’s official data, there were 4015 invest-
ment projects proposed by Thai companies to invest China with
the total value of about US $9.8 billion. However, the utilized,
or paid-up capital reached 3.29 billion in US $ only under the
various incentives provided by Chinese Central and Provincial
governments by from the year of 2000-201012. Table 6 demon-
strates the situation of Thai investment in China that unfortu-
nately in a state of up and down affected mostly by economic
and non-economic factors. Furthermore, Thai investment to
China is smaller if compare with the investments of the other
old ASEAN member countries’ to China. The figures provided
by China’s Ministry of Commerce have indicated that Singa-
pore companies have put in US $24.38 billions investment in
China within a half and six years from 2005 to the end of 2011;
Malaysia, US $2.36 billion; Philippines US $9.5 hundred mil-
lion, and Indonesia US $7 hundred million, that all surpassed
that US $6.3 hundred million of Thai investment to China in
the same period13.
Most Thai investors are investing China’s small and medium
scale projects, only a few big companies are investing some
more important China’s projects14. Areas of investment ranging
from agribusiness and agro industries, hydro electrical and coal
10According to China’s Xinhua news report, the two premiers witnessed the
sealing of seven bilateral cooperation agreements on issues ranging from
trade, agriculture and railways to flood and drought prevention and ocean
research. Xinhua news report, China, Thailand upgrade bilateral ties, vow
closer trade links. April 17, 2012.
http://news.xinhuanet.com/english/china/2012-04/18/c_131533612.htm.
11People’s Daily Online. Chinese president demands stronger Thailand ties
(Xinhua), April 19, 2012 http://english.people.com.cn/102774/7791797.html
12http://th.china-embassy.org/chn ztgx/gxgk/t86119.htm/.
13China’s Ministry of Commerce.Cited from Wang Yu-zhu, Table 1. P.13.
14Namely, the CP group, Saha-union group, Kasetrungrueng Co., Lid.,
Cement Thai Group, Katingdaeng (Red Gore)group, Bangkok Bank Co.,
Ltd., Thai Farmer bank (Kasikorn Bank), M-Thai group, Mitphol Group,
and Central Group.
9Total trade value of agro-
p
roducts of China and Thailand increased by 5
folds within ten years. 17 Februry, 2012. http://www.caexpo.org.

SHEN H. F.
56
Table 5.
Thai major original products to China’s market, 2001-2010 (Value: hundred million US $).
Items 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Rubber 2.72 3.58 7.16 7.85 8.15 13.54 15.91 19.38 15.56 24.46
Cassava 1.23 1.38 1.69 2.82 3.83 5.30 4.72 3.39 7.91 11.56
Rice 0.82 1.04 0.98 2.25 1.93 2.75 2.16 1.60 2.11 2.23
Fruits 0.31 0.35 0.69 0.73 0.97 0.98 1.28 1.51 2.0 2.03
Sources: same as Table 3.
Table 6.
Thai investments in China, 2000-2010 (Value: ten thousand US $).
Year No. of projects Growth (%)Utilized capital Growth (%)
2000 130 9.24 20357 37.25
2001 140 7.69 19421 −4.6
2002 161 15 18772 −3.34
2003 194 20.5 17352 −7.56
2004 162 −16.49 17868 2.97
2005 147 −9.26 9590 −46.33
2006 108 −26.53 14860 54.95
2007 79 −26.85 8948 −39.78
2008 56 −29.11 12921 44.4
2009 48 −14.29 4866 −62.34
2010 40 −16.7 5134 5.5
Sources: China’s Ministry of Commerce. Cited from website of Economic and
Commercial Counselor’s Office of the Embassy of the People’s Republic of
China in the Kingdom of Thailand. November 17, 2011.
http://th.mofcom.gov.cn/aarticle/zxhz/hzjj/201111/20111107835309.html.
power generation, brewery, cosmetics, motorcycles and auto
parts, commercial banking, retail-trade, hotel and restaurants,
sports activities (i.e. the golf course), real estate and trading.
Chinese investment to Thailand in this first decade of 21st
century is also not very smooth, with the lowest in 2005 for
only US $4.77 million, but highest in 2007 of US $76.41 mil-
lion, and the rest of the years were tramped. Chinese figures
show that Chinese investments to Thailand were US $57.31
million in 2003; US $23.43 million in 2004; US $4.77 million
in 2005; US $15.84 million in 2006; US $76.41 million in 2007;
US $45.47 million in 2008; US $49.77 million in 2009 and US
$6.9987 billion in 2010.
Taking into account that Chinese enterprises, both state-
owned and private have made a great stride in investing South-
east Asia under the encouragement of “going out” policy of the
Chinese government, the Chinese investment in Thailand did
not increased but dropped significantly after 2003, hence, the
proportion of which has been also reducing, and dropped even
to 1.84% in the total in 2008 and 2009. The major constraints
of bilateral investment will be discussed in next section. The
situation changed in 2010 however, the year witnessed the re-
newing momentum of Chinese investment to Thailand while
the Chinese FDI overseas to the world has achieved unprece-
dented increase when China’s enterprises have seized the op-
portunity of the picking up of world economy. China’s official
statistics showed that China’s FDI to Thailand of that year was
7 hundred million US$, that enable Thailand to rank No. eleven
among the other twenty biggest destinations for China’s out-
ward investment in the year15.
Chinese investments in Thailand are generally in a form of
joint ventures, and investing in the field of agriculture and
agro-industries, bio-fuel or alternative energy production, min-
eral and ceramics, textiles and garments, metal products and
machinery. The major Chinese companies in Thailand are: The
Worldbest Group investing in Thai textile raw material produc-
tion, final textile products and citric acid for industrial uses
under the “DICA” brand; Haier Group, in joint venture with
Local Thai partners, the Di-star Company to produce electrical
appliance; TCL Corporation set up factories in Thailand to
produce audio-visual equipment; Huawei Technology Corp.
invest Thailand with the local companies by doing different
projects of cellular-network construction, or communications
network of CAT and the others. (Sompop, 2009: pp. 326-332).
Other Forms of Economi c Co oper a ti on Are Vi t al to
Sino-Thai Bilateral Relations
The expansion of economic relations between China and
Thailand can be seen not only with respect to trade in goods
and investment, but also in other forms, including tourist coop-
eration, trade in service and financial coordination.
China and Thailand share the common ground for coopera-
tion between their tourism sectors, and both countries are re-
ciprocally the source market of the other since the effect of the
linkage of the tourist industry to economic expansion has been
recognized as an engine for economic growth. With the rapid
increase of Chinese living standard, more and more Chinese
people are going abroad to spend their vocation. With an aim to
abstract more Chinese to come, Thai government adopted many
effect actions. In addition to improve soft and hard ware of
domestic facilities including to improve the quality of domestic
tourist-related service sector, and to work on diversifying Thai
tourism industry so that tourists can enjoy cultural excursions
while, at the same time, being able to pursue other activities
like spas, sports, medical check-ups and eco-tourism.
In addition, The Tourism Authority of Thailand has been
working closely with the Thai-Chinese Tourism Association
and the Chinese private sector to promote quality tourism ac-
cording to the Royal Decree on Tour Operators and Tour
Guides 2008 and also the Chinese government’s new regula-
tions on tour operators and travel agents. Over one million
tourists from China visit Thailand since 2006. In 2007, the
15http://hzs.mofcom.gov.cn/aarticle/date/201109/20110907741156.

SHEN H. F.
number of Chinese tourists was the fourth largest in terms of
international visitors to Thailand.
Affected by global economic recession, Thai political insta-
bility, and severe flood followed, Thailand has experienced a
drop in the number of Chinese tourists. In order to abstract
more foreign visitors, including Chinese tourist, Thai govern-
ment has already undertaken several measures, such as the
waiving of visa fees which was effective from March to June
2009 and later extending it until March 2010; reducing take-off
and landing charges for aircrafts; and lowering the entrance
fees for Thai national parks by 50 percent.
Moreover, to ensure safety and provide Chinese tourists with
peace of mind, and to protest their interests, Thai Cabinet ap-
proved a scheme to provide travel insurance for Chinese tour-
ists in case of unexpected events. The tourist attractions of the
local governments and agencies will also improve the relevant
laws and regulations, and to set up a special committee to help
solve unexpected problems, a 24-hour alarm Telephone com-
plaints was set up as well. Furthermore, Thai government has
taken concrete measures to improve Thai tourism practitioners
the level of Chinese. Consequently, Thailand has successfully
attracted 1.7 million Chinese tourists visiting Thailand in 2011.
Thai figure showed that about 7.57 hundred thousand Chinese
tourist visited Thailand in the first four months of 2012, and the
figure is likely to reach two million in 2012, if in the case,
China will surpass Malaysia to be Thai largest tourist country
source16.
Contracted projects are becoming the important content of
trade in service between the two countries. However, it has
showed the feature of unilateral. According to source of
China’s Ministry of Commerce, Chinese enterprises have
signed engineering contracts total $730 million and completed
the US $460 million turnover in Thailand in 2010 , while the
cumulative total of contracted projects signed by the Chinese
enterprises have achieved 7.14 billion US dollars, of which, a
turnover of 4.42 billion U.S. dollars has already been completed.
China’s export of service in Thailand is concentrated in the
field of construction17.
Financial cooperation or coordination of both sides has al-
ready existed and is growing with a strong momentum in the
recent years. Thai commercial banks have long had a presence
in China to better respond to the needs of their customers in
China, namely Bangkok Bank, kasikorn Bank, and Keung Thai
Bank. Bank of Thailand is also seeking presence in China.
Likewise, Bank of China and Industrial and Commercial Bank
of China (ICBC), the two largest Chinese banks, are already
operating in Thailand.
With the purpose of strengthening financial cooperation, the
Central Banks of the two countries have made significant pro-
gress in the field. Bank of Thailand has established a represen-
tative office in Beijing in 2011. The Beijing office is Thai first
office in Asia and also the first central bank from ASEAN re-
gion to have its representative office in China. Since it estab-
lishment, Thai Beijing representative office fulfilled its objec-
tives to further promote closer ties between the Bank of Thai-
land and the People’s Bank of China, as well as other Chinese
government agencies.
The People’s Bank of China and the Bank of Thailand con-
cluded the bilateral local currency swap arrangements during
the visit of Chinese Vice President Xi Jinping to Thailand in
2001. The Agreement provides for exchange of respective local
currency up to 70 billion Yuan or 320 billion Baht, to facilitate
bilateral trade and investment. In addition, the Bank of Thai-
land received approval from People’s Bank of China and China
Securities Regulatory Commission to participate in the inter-
bank bond market and securities market here in China18. Be-
sides, Bank of China Bangkok Branch issued first UnionPay
dual-currency debit card (银联双币借记卡) in Thailand in July
2011 to satisfy the needs of both Chinese and Thai people who
travel between the two countries19.
The Driving Forces and Positive Factors in
Boosting the Expansion of Sino-Thai Bilateral
Economic Relations
A painstaking study will find that some driving forces from
Below and above are important factors in boosting the ad-
vancement of bilateral relations.
Thailand Becomes the Activist in the Building of
China and ASEAN Free Trade Area
The merchants of the two countries are seeking the intra-re-
gional market access due to the eruption of East Asian financial
crisis in 1997 and the resurgence of trade protectionism and the
shrinkage of FDI from the western countries caused by global
economic downturn triggered by the US sub-prime mortgage
crisis since 2007, that has become one of the un-neglected
driving forces to accelerate the momentum of East Asian re-
gional economic cooperation.
Especially, Thailand becomes the activist in the building of
China and ASEAN Free Trade Area (CAFTA) as Thai official
and non-official sectors has finally recognized to reaping the
benefit form the CAFTA while avoiding the negative impacts.
While participating the tracks of tax deduction, namely, Normal
Track and The Sensitive Track which were described in
Framework Agreement on Comprehensive Economic Co-Op-
eration Between ASEAN and the People’s Republic of China,
Phnom Penh, 4 November 200220, that were further concreted
in the other two important agreements21, Thai government
signed with the Chinese government on June 18, 2003, an
“Agreement between the Government of the People’s Republic
of China and the Government of the Kingdom of Thailand on
Accelerated Tariff Elimination under the Early Harvest Pro-
18Prasarn Trairatvorakul: Economic and Financial cooperation between
China and Thailand, Opening remarks by Dr. Prasarn Trairatvorakul, gov-
ernor of the bank of Thailand, at the Luncheon to inaugurate the bank o
f
Thailand Beijing Representative office, Beijing, 6 April 2012.
19In addition to China, the card is accepted by UnionPay’s network through-
out 110 countries and regions, including Thailand. Any consumption in
China will be settled in Renminbi and any consumption in Thailand or other
countries and regions will be settled in Thai Baht. Exempting from currency
exchange fee, Thai residents, especially those who travel between the two
countries, will enjoy such a convenient service.
http://www.boc.cn/en/bocinfo/bi1/201107/t20110721_1472474.html;
http://english.peopledaily.com.cn/102774/7792077.html.
20http://www.aseansec.org/13196.htm.
21See Protocol to Amend the Framework Agreement on Comprehensive
Economic Co-operation between the Assoiation of Southeast Asian nations
and the People’s republic of China, Bali on October 6, 2003
http://www.aseansec.org/15157. htm; Agreement on Trade in Goods of the
Framework Agreement on Comprehensive Economic Co-operation between
the Association of Southeast Asian Nations and the People’s Republic o
f
China, 29, November 2004. http://www.aseansec.org/16646.htm.
16http://world.people.com.cn/GB/157278/17935666.html.
17http://hzs.mofcom.gov.cn/aarticle/date/201109/20110907741156.html.

SHEN H. F.
gramme of the Framework Agreement on Comprehensive
Economic Cooperation between ASEAN and China”, Thailand
and China agreed to rapidly eliminate tariffs on fruit and vege-
tables and other agricultural products over a two-year period
from January 2004 to January 2006; tariffs on these products
had been totally eliminated. In addition, Tariff reduction under
the Early Harvest Program of China and ASEAN covers agri-
cultural goods in the customs tariff schedule codes 01 through
0822, but Thailand and China have agreed to accelerate tariff
reduction on two addition products, anthracite and coal residue.
Although in earlier stage of the “Earlier Harvest Agreement”
has caused some problems to the farmers of both sides. This
was painful for farmers, particularly those with cooler growing
climates similar to China, such as garlic producers in the north
of Thailand and Logan producers in Guangxi of China. How-
ever, the two governments are still firmly committed to the deal.
They have formed a joint working group to survey the problems
and obstacles and to enhance information exchange, and in the
final have won the win-win situation.
Since CAFTA is entering the second stage from 2011 to
2015, when the other four ASEAN new member states starting
the zero tariffs, and the focus of CAFTA will expand to trade of
service and market of investment according to the schedule,
Thai government has already taken some positive steps and
goes ahead of the schedule especially in the financial service.
Closer Contacts of High-Level and Different Levels of
Leadership Have Greatly Promoted Bilateral
Economic Relations
Officials from both nations can now praise the excellent state
of relations, with frequent reciprocal visits by senior officials of
both countries. At height of the relationship, the members of the
Thai royal family have made China their frequent destination;
especially Her Royal Highness Pricess Maha Chakri Sirindorn
has visited China more than three dozen times. In addition,
more than 1000 delegates regularly travelled back and forth
between the two countries annually since the normalization of
diplomatic relations and before the eruption of severe political
uncertainty in 200823, cementing the Sino-Thai friendship as
never before. In March of 2010, HRH Princess Sirindorn was
chosen by the Chinese people (in an online poll) as one of the
top ten best friends of China. From the Chinese side, President
Jiang Zemin, Premier Zhu Rongji and President Hu Jintao paid
an official visit to Thailand in 1999, 2001, 2003 respectively.
Recently, Vice President Xi Jinping and Chairman Jia Qinglin
visited Thailand in December 2011 and April 2012 respectively.
Given their importance in fostering relations between the two
countries, such visits ensure that this good relationship will
always remain strong.
The two countries have also concluded a 23 group of friendly
cities and provincial capitals: Beijing-Bangkok (北京市–曼谷
市); Yantai City-Phuket (烟台市–普吉府); Kunming-Chiang
Mai City (昆明市–清迈市); Shanghai-Chiang Mai (上海市–
清迈府); Yunnan Province-Chiang Rai (云南省–清莱府);
Henan Province-Chonburi (河南 省 –春武里府); Nan-ning-
Khon Kaen City (南宁市–孔敬市); the Huludao City-
Phetchaburi City (葫芦岛市–碧武里市); Guangxi Zhuang
Autonomous Region-Surat Thani (广西壮族自治区–素叻他
尼府); Wuzhou City-Chanthaburi (梧州市–尖竹汶府);
Shaanxi Province-Sukhothai (陕西省–素可泰府); Hainan-
Phuket (海南省–普吉府); Liuzhou0Rayong (柳州市–罗勇
府); Beihai City-city of Hat Yai (北海市–合艾市); Chaozhou
City-Bangkok (潮州市–曼谷市); Jieyang City-Lampang City
(揭阳市–南邦市); Qinzhou City-Tsai Clan House (钦州市–
龙仔厝府); Qingdao-Chiang Mai (青岛市–清迈府); Harbin
City-Chiang Mai (哈尔滨市–清迈市); Chongqing City-
Chiang Mai (重庆市–清迈府); Yulin City-North the Lam
slope government (玉林市–北榄坡府); Dehong Dai and
Jingpo Autonomous Prefecture (德宏傣族景颇族自治州–达
府); Guangzhou City-Bangkok (广州市–曼谷市). Different
kinds of delegations from the 23 groups of friendly cities and
provincial capitals in particular are frequently exchanged.
“Good Nei ghboring” Diplomacy Implemented by
Chinese Government has Brought about Direct and
Positive Implications for Sino-Thai Bilateral
Economic Contacts
At the first ASEAN + 3 summit held in Malaysia in Decem-
ber 1997, China and the Southeast Asian countries agreed to
“promote good neighborly and friendly relations, increase high-
level exchanges, strengthen the mechanism of dialogue and
cooperation in all areas to enhance understanding and mutual
benefit”24. Since that time, China has made great efforts to
demonstrate its good neighborliness and friendship to the coun-
tries of Southeast Asia, including Thailand. China has assisted
Thailand under the mutual cooperation of the two countries in
several ways and from many aspects that included the efforts of
promotion of economic linkages of Thailand and South China,
co operations on biotechnology, alternative medicine, and ag-
ricultural development, as well as educational development.
To further promote bilateral trade, the two countries have
agreed on a Joint Action Plan on Thailand-China Strategic Co-
operation which is a five-year cooperative framework for the
period 2007-2011. The aim of this Joint Action Plan is to in-
crease trade between the two countries to 50 billion USD by the
year 2010. On June 24, 2009 when Mr. Abhisit Vejjajiva,
Prime Minister of the Kingdom of Thailand visited China, the
two countries have signed an Agreement on Expanding and
Deepening Bilateral Economic and Trade Cooperation to fur-
ther expand and deepen our bilateral economic and trade coop-
eration, which covers a wide-range of areas of mutual interest,
for example agriculture, food, energy, logistics, tourism, res-
taurants and SMEs25.
When Incumbent Thai Prime Minister Ms. Yingluck Shi-
nawatra paid an official visit to China from 17-19 April this
year, the two countries also agreed to establish a comprehensive
strategic cooperative partnership. In the Joint Statement of 19
April 2012, the two sides reaffirmed their will to further de-
22Live animals, meat and other edible animal parts, fish products, dairy
products, fowl eggs, live trees, vegetables and fruit, and edible nuts.
23The recent political instability in Thailand included a bloodless military
coup in 2006, the creation of a new constitution and elections in 2007, a
political and constitutional crisis in 2008, and violent government crack-
downs on organized protests from 2008-2010. While the long period o
f
instability formally ended with the elections of July 2011, which brought the
Pheu Thai Party to power, the political situation remains fragile.
24“Joint Statement of the Meeting of the Heads of State/Government of the
Member States of ASEAN and the President of People’s Republic of China”
17th December 1997.
25Yang Qi, Obtaining fruitful results with China, Thai PM gained successful
visit April 22, 2012
http://news.ynxxb.com/content/2012-4/22/N97950017957.aspx
26http://english.gov.cn/2012-04/18/content_2116275.htm.
58

SHEN H. F.
velop their partnership and solidify cooperation, as well as ex-
pressed satisfaction with the state of bilateral relations26.
Thai Embassy and Consulates in China Play a Big
Role in Marketing Thai Products to China Domestic
Market
Thai embassy in Beijing and consulates in Shanghai,
Chengdu, Xian, Xiamen, Guangzhou and Kunming has played
a big role in marketing Thai products to China domestic mar-
kets. So far as I know the personals from Economic and Com-
mercial Counselor’s office are paying much attention and spend
a great efforts in conducting China’s market survey and re-
search. While assisting Thai merchants to get as more as possi-
ble the China’s market information, they have taken an actively
part in organizing the Thai merchants to attend all kinds of
Trade Expos held in China with an aim to introduce Thai prod-
ucts to Chinese consumers. In addition, Thai embassy and con-
sulate have done a wonderful job in helping Thai government to
team up with leading department stores and importers from
China including City Shop, Carrefour, Lotus Supercenter, Ise-
tan, Metro and Wal-Mart to stage marketing and sales activities
in China.
Problems and Future Trend of Sino-Thai
Economic Relations
Problems in Sino-Thai Economic Relations
Even though much has reaped in the bilateral economic rela-
tions between China and Thailand, nevertheless, some prob-
lems still existed through in-depth study. Theoretically, there
are a lot of rooms for development for “South to South” eco-
nomic cooperation like the one between China and Thailand,
more competitiveness than complementarities however, is ex-
isted especially in the trade and investment in term of the simi-
larities of industry structures, hence, some problems are inevi-
tably emerging in the process of the development.
In terms of structures of bilateral trade, some of the major
imports and exports of the two countries, as matter of fact, are
overlapped. Taking the trade structure of 2010 for example,
there were three out of ten products are overlapped (see Tables
3 and 4), namely, while the product of Electronic integrated
circuits was listed as the No. 9 in Chinese export to Thailand,
which also was the No. 8 in Thai export in China; Electrical
equipment and spare parts was listed as the No. 2 in Chinese
export to Thailand which also was the No. 10 in Thai export in
China; Mechanical equipment and spare parts was listed as No.
3 in Chinese export to Thailand, while No. 1 in Thai export in
China. Taking into consideration of the “good neighboring
policies” of Chinese government that in many situation demon-
strated interference of the state that instructed some state-
owned companies to import the goods from Thailand, thus, the
question of sustainability will raised.
Since China and Thailand are all absorbing a large amount of
foreign investment, and more and more multi-national enter-
prises (MNEs) and transnational corporations (TNCs) are set-
ting up headquarters in these two countries, therefore, a lot of
intro-trade within the branch of companies have produced. Es-
pecially for intro-industrial goods containing electronic prod-
ucts, cross borders more than one times, these cost double
counting of the trade that accounts for about as high as 30 per
cent of the total trade for the trade between the China and
ASEAN in general (Sheng Lijun, 2007; Percival, 2007), and
probably the same situation with the trade between China and
Thai. Since China and Thailand become in certain degree a
kind of “world factory”, and the automobile production base of
all kinds of brand or logo, hence, computer equipment and parts,
automatic data processing equipment and parts, mechanical
equipment and spare crossing border of the two countries fre-
quently are as matter of fact the intro trade within the MNEs or
TNCs which benefit more to the foreign investors than to the
people of the two countries.
Complicated reasons caused the bilateral investments far be-
hind bosh sides’ expectation. The major constrains can be de-
scribed from the perspectives of politically, economically and
culturally.
From China’s perspective, the instability of Thai political
situations started since 2006 was the first major barrier for
Chinese investor to invest Thailand in consideration of the risks.
Besides, Thai economic situation are also un-favorable to Chi-
nese investment as Thailand was the center of East Asian fi-
nancial crisis, and the economy was under the constrains of
IMF load’s condition, that resumed its recovery only for several
years since 2003 before it caught in political unrest in 2006.
Moreover, the relatively poor investment environment is also
an important reason to prevent the Chinese investors to invest
in Thailand, such as higher wage rates or the labor turnover27,
different labour employment system as well as labor laws and
regulation, and the prices of raw materials and components are
much higher than those in China (Sompop, 2009).
The Thai investors have also encountered obstacles while
investing in China. Above all, the shortage of qualified execu-
tives with good language, thence, Thai companies investing
China have to hire the one from the other countries, not only
add the cost, but also cause some unloyalty problems. In addi-
tion, Thai investor are facing business network barriers as their
counterparts do in Thailand, as many of small and medium-
sized companies could not get access deep to the Chinese busi-
ness circles to build up business network.
Though China’s vast domestic market absorbs a large
amount of Thai agro-products ascribing to the introduction of
the “Earlier Harvest” , Nevertheless, because some of special
product like fruits and vegetables having the features of sea-
sonal, not easy storage, and lacking flexibility of market de-
mand and etc., very often the vegetable farmers and fruit farm-
ers of both sides are suffering form lacking of the market in-
formation, as a result, their produce unsalable due to the market
saturation.
Future Trend of Sino-Thai Economic Relations
According to the agenda, the building of CAFTA has to un-
dergo three stages, taking about another one decade. The first
stage was from 2002 to 2010; the second stage is from 2011 to
2015, when the other four ASAEN new member states starting
the zero tariffs and the focus of CAFTA will expend to trade of
service and market of investment. The third stage is after 2016,
and CAFTA will continue to be more consolidated and perfect.
China and ASEAN-10 have signed the “Second Protocol to
Amend the Agreement on Trade in Goods of the Framework
Agreement on Comprehensive Economic Co-Operation be-
27In Thailand, wage rates are usually about 30-50% higher than in China.
28http://www.aseansec.org/documents/acfta/2nd-Protoco l-to- Amend - the- TI
G-CTC.pdf.

SHEN H. F.
60
tween the Association of Southeast Asian Nations and the peo-
ple’s Republic of China” in Kuala Lumpur, the capital of Ma-
laysia on October 29, 201028.
Global economic meltdown and the re-emergence of global
trade protectionism have once again highlighted the importance
of regional economic cooperation.
There are complementarities between China and Thailand
economically ascribing to the features of diversities of these
two countries in the empowerment of natural resources, eco-
nomic development stage, and the public consumption. Since
the governments of the two countries have recognized the im-
portance of the further economic cooperation are in the benefit
of the people welfare, and many effective initiatives are being
adopted in particular in the form of seminars, study visits, pro-
gram training cooperation projects and Est., that can greatly
improve both sides to understand each other’s political, eco-
nomic and cultural situation. Moreover, the coordination of the
two governments are going on so far smoothly, there are good
reasons to trust that the relationship between China and Thai-
land in the next five years will be further enhanced.
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