Greater opportunities for Thailand as a destination for China's outbound investment have been spotted as trade diversifies amid the US-China trade dispute, according to a Siam Commercial Bank (SCB) senior executive.
Although the trade brawl has had an adverse impact on Thailand's exports and slowed economic growth, the row opens up new investment opportunities for Thais, said Manop Sangiambut, SCB's executive vice-president for China business.
Foreign direct investment by China in Thailand has continued to rise over the past few years, and the mainland is a key trade partner and one of the top five foreign investors in Southeast Asia's second-largest economy.
"The ranking is expected to jump to No.1 in the next five years amid positive growth potential," Mr Manop said in an exclusive interview with the Bangkok Post.
The trade war has revved up the China Going Out Policy on investment, while Asean markets are the chief destination for mainland investors, especially Thailand.
Strong infrastructure is a key factor drawing Chinese investors to Thailand, apart from the country's infrastructure megaproject roadmap, particularly in the Eastern Economic Corridor.
The Board of Investment's investment and tax incentives are also attracting Chinese investment, with China using Thailand as a production hub to export goods to Asean, Mr Manop said.
"China's FDI in Thailand [based on SCB's customers] shows growth in all dimensions, starting from large, mid-sized and small corporate firms, as well as small and medium-sized enterprises led by the manufacturing sector," he said. "Annual sales of these companies average 100 billion baht, and each investment project averages US$100 million."
SCB, the country's biggest lender by assets, has operated in Shanghai for more than a year after receiving a branch licence from the Chinese government at the beginning of 2018.
At the Shanghai branch, the bank offers a full range of financial services, focusing on Chinese corporate customers who want to branch into Thailand.
Financial services include project financing, working capital, trade finance, cash management, foreign exchange and other advisory solutions such as business matching, mergers, acquisitions and joint ventures.
"Chinese fintech firms also pay attention to expanding into Thailand, and this is a great opportunity for SCB to partner with these companies," Mr Manop said, and this is one of the bank's key strategies for the Chinese business plan in 2019.
Several Chinese industries are looking for opportunities for business expansion, and some companies have picked Thailand as their first outbound foray.
SCB, however, focuses on business sectors for which the bank has expertise and sufficient data, Mr Manop said.
"For instance, we cannot support Chinese property sector investment in the Thai market because we don't have enough expertise and data for the industry," he said.
Mr Manop also recommends that Thai corporate customers invest in China. If Thai investors find that investment in China is economically viable, they should conduct an in-depth study to learn all about business dealings and the culture, he said.
R&D is key for sustainably expanding a business in the world's second-largest economy.
Amid the intensified trade spat between the US and China, several Chinese industries have felt the pinch. But ample opportunities remain in several business areas in China.
The retail industry in China is a prime example, Mr Manop said. The mainland's retail sales are growing by 8-9% annually.
China's GDP growth for this year is predicted at 6.2%, still considered high but down from 10% in the past.
SCB could enlarge its Chinese business team in line with high growth potential.
Right now there are 20 employees of the offshore network, all of them locals. The bank also has 20 people on staff for the Chinese desk in Thailand.
SCB has expanded the business on target in terms of loan extension and revenue generation.
With the bank's inorganic growth strategy, it does not feel the need to apply for local banking licences for Chinese business.
Partnership models and the digital platform are the main factors for expanding the business amid the changing business landscape, Mr Manop said.