Strategic Analysis: Chinese Business Activity in Thailand (Abstract)

Fol­low­ing Thai­lands May 2014 mil­i­tary coup, rela­tions with the United States soured, while those with China improved con­sid­er­ably. This was yet another case of Chi­nas no strings attached pol­icy, com­bined with the prospect of sig­nif­i­cant eco­nomic and finan­cial invest­ment, alter­ing the geopo­lit­i­cal align­ments of a devel­op­ing coun­try.

Although China sur­passed Japan in 2012 as Thai­lands largest all-around trad­ing part­ner, Japan remains the lead­ing investor in Thai­land and the U.S. the most impor­tant provider of mil­i­tary equip­ment, tech­nol­ogy, train­ing and sup­port even under present lim­i­ta­tions. Nev­er­the­less, Thai offi­cials have jointly pur­sued ever-greater Chi­nese invest­ment (which Bei­jing has pushed for as well) in high-tech indus­tries, includ­ing the auto­mo­tive indus­try, elec­tron­ics, bio­fu­els, petro­chem­i­cals and, impor­tantly, trans­porta­tion.

For a mix of these eco­nomic and geopo­lit­i­cal rea­sons, Bei­jings influ­ence in the coun­try appears to be on the rise. Thai­land is report­edly now hold­ing more high-level bilat­eral meet­ings with China than any other coun­try. The two coun­tries have car­ried out a string of more ambi­tious joint mil­i­tary exer­cises, includ­ing the first joint air force exer­cises ear­lier this year. And, in May 2016, Thai­land expressed its sup­port for Chi­nas posi­tion that ter­ri­to­rial dis­putes in the South China Sea should be solved via bilat­eral not mul­ti­lat­eral nego­ti­a­tions.

Observers have even noted a con­cern­ing num­ber of recent inci­dents where polit­i­cal dis­si­dents and Chi­nese cit­i­zens seek­ing refugee sta­tus in Thai­land have been repa­tri­ated or even dis­ap­peared, likely turned over to Bei­jing in def­er­ence to the grow­ing bilat­eral rela­tion­ship.

Unlike in other cases, how­ever, this tran­si­tion toward Bei­jing and away from the U.S. has appar­ently been dri­ven less by the dan­gling of easy money and mas­sive invest­ment deals as has been the case, for exam­ple, with Cam­bo­dia, Burma, Demo­c­ra­tic Repub­lic of Congo and other coun­tries plucked from the arms of for­eign donors by Chi­nese eco­nomic and finan­cial strate­gies and more by the geopo­lit­i­cal instincts of Thai lead­er­ship to shore up the coun­trys posi­tion with the big pow­ers after U.S. rebuke of the mil­i­tary coup.

In other words, Thai­land has shown some signs that its new rela­tion­ship with China is not, nec­es­sar­ily, based on eco­nomic des­per­a­tion. It has pushed back against invest­ment offers that are viewed as one-sided (e.g., the China-Laos-Thai­land high-speed rail project) and shown, via its rela­tion­ship with Japan, that it has other options in the eco­nomic and finan­cial domain.

That said, there is still con­sid­er­able risk that Chi­nas efforts to estab­lish tighter rela­tions and greater lev­els of invest­ment over time (includ­ing in strate­gi­cally sig­nif­i­cant sec­tors, like trans­porta­tion) will ulti­mately influ­ence the coun­trys cal­cu­la­tions with regard to Chi­nese power pro­jec­tion in the region. The prospect of AIIB fund­ing, for exam­ple, to help the coun­try reach its lofty invest­ment goals and other eco­nomic and finan­cial strate­gies could yet lure Thai­land into Bei­jings strate­gic vision for the region focused on Chi­nese-friendly infra­struc­ture and trans­porta­tion projects.

 

Excerpted Deals and Transactions:

  • In July 2014, sev­eral months after tak­ing power, the Thai mil­i­tary gov­ern­ment announced a $75 bil­lion mas­ter plan to upgrade the coun­trys trans­porta­tion infra­struc­ture. China has tar­geted Thai­lands trans­porta­tion sec­tor espe­cially as an area for joint col­lab­o­ra­tion, as it has in other South­east Asian states. Thai­land has a crit­i­cal role to play as a regional hub in Chi­nas efforts to con­nect its mar­kets over­land with those of other ASEAN coun­tries (i.e., Burma, Malaysia, etc.), includ­ing their ports along the Gulf of Thai­land, the Andaman Sea (and out to the Indian Ocean) and the Malac­can Strait. Chi­nas moti­va­tions, how­ever, are not purely com­mer­cial.
  • One of the most ambi­tious infra­struc­ture projects being dis­cussed in Thai­land is the Kun­ming-Bangkok stan­dard-gauge high-speed rail­way, to serve ulti­mately as one part of Chi­nas vision for a Pan Asian High­Speed Rail­way Net­work (ulti­mately link­ing Kun­ming in South­ern China to Sin­ga­pore over nearly 3,000 km away). For China, the moti­va­tion is to link south­ern China with Thai­lands indus­trial east­ern coast, deepsea ports and to Bangkok and poten­tially even cre­ate a high­vol­ume path­way from Bangkok out to the Andaman Sea and Indian Ocean (again, cir­cum­vent­ing the Malacca Strait). Thai­land also pro­vides the only land bridge to Sin­ga­pore. Nego­ti­a­tions between China and Thai­land, how­ever, have recently been derailed.
  • Thai mil­i­tary signed an agree­ment with NORINCO to pur­chase twenty-eight MBT-3000, Model VT4 main bat­tle tanks, for $150 mil­lion and estab­lish a ded­i­cated ser­vice facil­ity in Thai­land
  • Chi­nese com­pa­nies have been push­ing the planned Kra Canal project, which would cut 30 miles through south­ern Thai­lands Kra Isth­mus, link­ing the Andaman Sea with the South China Sea. It would allow ships to avoid the Strait of Malacca, a con­tin­u­ing Chi­nese strate­gic fix­a­tion
  • Huawei opened a $12 mil­lion South­east Asia regional head­quar­ters in Bangkok; Thai­land is the com­pa­nys largest mar­ket in in the region.