New graduate Xiao Xu has a modest job at a Bangkok tour agency, booking flights, hotels and doing paperwork. She has no prior work experience earns two or three times what a professional programmer would make, mainly because she’s Chinese.
Her story epitomises the huge shift in tourism industry development in Thailand as the result of the surge in Chinese visitors in recent years. Last year 2.6 million Chinese tourists travelled to Thailand and the figure is expected to rise to 4 million in 2013, making them by far the country’s largest group of foreign visitors.
The boom in tourists from China has also grabbed the eyeballs of investors from China.
The smash-hit movie Lost in Thailand first stoked Chinese people’s interest in the Land of Smiles, and as they started to visit in huge numbers, new businesses started forming, not only in tourism but in other areas.
Thailand is a tourism heaven, of course, but more importantly, it boasts natural resources such as rice and rubber, natural gas, petroleum and hydropower, and other attractions of commercial importance and economic interest to China.
What’s more, Thailand is the geographic centre of Southeast Asia and is expected to acquire a more significant role once the Asean Economic Community (AEC) is formed in 2015.
So it’s no surprise that more Chinese enterprises are coming to Thailand, as they seek to diversify and also find a new base from which to serve the huge economy of their home country. The Beijing government’s “Going Out” strategy, with its focus on developing overseas markets, has been given high priority in recent years, particularly for state-owned enterprise. As a result, Chinese investment has risen sharply in Thailand in recent years.
At the same time, more Thai enterprises are starting their journey into Chinese markets. That journey began with Thai business giants such as the CP Group, Central Group and Kasikornbank, which already enjoy great success in their domestic market and are ready to develop their presence abroad.
“Everyone wants to catch up with the high-speed train of the Chinese economy,” said Wichai Kinchong Choi, the first senior vice-president for Chinese business development of Kasikornbank.
At the same time, as they benefit from domestic tourism growth either directly or indirectly, Thai enterprises are starting to pay attention to the domestic Chinese tourist market. Services for Chinese are offered in different fields including airports, tourism companies, hotels, airlines, restaurants, shopping malls, banks, luxury brands, hospitals, and so on.
The need to learn about Chinese culture, Chinese people’s consumption behavior and way of thinking has been more essential than ever.
Greater cooperation between Chinese and Thai enterprises and government bodies has been seen in recent years as well. Hence, there are great opportunities for both Chinese and Thai businesses that act as a bridge between the two countries. Since the two counties are now cooperating in many fields, a company that knows both cultures and markets well will be an asset.
In addition, access to resources and networks in China will be a key to success, as those who trade with the Chinese know how important such access is to create win-win situations.
However, one challenge for Thai enterprises could be overdependence on Chinese markets. Some Thai businesses, especially export trading companies, have found that after a brief honeymoon period in China, volumes begin to decline. Partly this has reflected a refocusing of Chinese economic strategy to focus more on domestic consumption after a stage of high export-led growth. The Chinese economy started has slowed from GDP growth rates of 10% three years ago to around 7.6% now, which is a level Beijing policymakers are comfortable with.
As a result of this moderating growth, some Thai enterprises that relied on the Chinese market saw a sharp downturn. For instance, rubber trading volumes have been falling since May 2013.
“Thai enterprises should seek ways to survive without [depending on] the supply of the Chinese market,” said Banthoon Lamsam, the CEO of KBank and a veteran China-watcher. “Thai enterprises need to analyse their own situation, do a strategic adjustment, and also need to be concerned about exchange rates.”
In the end, the decision is not simply a case of saying yes or no to doing business in China, but it’s more about strengthening the self-supporting capability of Thai enterprises. In fact, now that Chinese enterprises are showing more interest in Thailand, there is a great opportunity to shift the pendulum from being dependent on China to creating a two-way flow of business.