China’s ‘Zero-COVID’ Policy: An Economic Nightmare for Thailand

'Zero-COVID' Policy: an economic nightmare for Thailand

Chinese tourists ride elephants at the Nong Nooch Tropical Garden in Pattaya, Thailand, on March 1, 2017.

Credit: Depositphotos

On October 16, the Chinese Communist Party (CCP) opened its 20th National Party Congress with one, announcing a major leadership change, and two, reviewing China’s achievements in the past five years, thus charting a course for the coming years. five years. Much of the international discussion seems to focus on President Xi Jinping’s tightening control of authority, marking a change from China’s old-school (post-Deng Xiaoping era) leadership transition and, ultimately it could put Xi on a par with Chairman Mao Zedong. While this development certainly deserves attention, the CCP’s work report is what really matters in the eyes of observers in Thailand.

As the editor-in-chief of The Diplomat, Shannon Tiezzi wrote on these pages recently, the CPC work report released by Xi highlights China’s priority of stability and continuity over growth and change. Despite the problems and the catastrophic predictions, the “zero-COVID” policy will not be eliminated or relaxed in the near future. And, contrary to popular expectations (especially in the West) that Xi will take a more confrontational stance on Taiwan, Xi’s approach to Taiwan remains unchanged. He stressed that “the complete reunification of the nation must absolutely be done,” but, as Wen-Ti Sung said at the Australian National University observedHe did not refer to the “when” or the “how”.

Unlike, say, Japan and the Philippines, which might pay more attention to the Taiwan issue, Thailand’s biggest concern seems to be the zero-COVID policy. This is not to say that Thailand does not mind the prospect of China’s armed unification with Taiwan. But, as a neutral nation in a relatively secure geographical position, should China and the US clash over Taiwan, Thailand does not need to think about engaging in combat or providing logistical support like Japan and the Philippines do.

What will make or break the Thai economy, however, is the speed and scope of China’s economic reopening. After all, Thailand is heavily dependent on China in all dimensions: exports and imports, tourism and investment.

According to Thailand’s widely read economic blog Longtunman, the year 2021 saw Thailand export a total of 8.5 trillion baht worth of goods, of which about 1.2 trillion baht, or about 14 percent of total exports, went to China. At the same time, 24 percent of Thailand’s total imported goods came from China. It goes without saying that Thailand is extremely vulnerable to sudden shutdown orders from the CCP. Shanghai, for example, represents 27 percent of Chinese exports to Thailand, and when the city was undergoing a strict two month lockdown At the beginning of this year, many Thai companies practically ran out of the materials needed for the production of home appliances, such as air conditioners and cables. Similarly, the export of Thai durians, now one of the main products exported – to China went temporarily stopped in April after Chinese border inspectors detected traces of COVID-19.

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Then there is Thailand’s grudging dependence on Chinese tourists. On the one hand, Thais recognize that mass arrivals from China are crucial to boosting Thai tourism. On the other hand, many local Thais do not like Chinese tourists and are concerned about the existence of “zero dollar tours”, in which tour operators pressure low-budget Chinese tourists to shop only at approved (and often Chinese-owned) stores while actually contributing very little to local businesses. The pandemic, which has removed Chinese tourists from the equation, and inflation, which has resulted in higher travel costs, have urged Both the government and Thai businesses need to pay more attention to “quality” tourists who stay longer and spend more. In addition to existing markets in Asia and Europe, the Thai government has approached high-potential clients in India and the Middle East. The problem is that the void left by Chinese tourists is too great.

Even with an influx of “quality” tourists, Thailand probably still needs Chinese tour groups to keep “everyone” in its hospitality industry fed and happy. High-spending tourists, particularly those on health and wellness trips, naturally prefer to stay in high-end accommodations, be it independent boutique hotels or chain-brand hotels. Smaller businesses are then left behind and have been further weakened by rising operating costs due to inflation, higher interest ratesand this month minimum wage increase of 5.02 percent.

Investment is another important aspect. Statistics from the Real Estate Information Center published by the Bangkok Post reveal that Thailand’s foreign condo investment market has been dominated by Chinese buyers, with more than 7,600 condo transfers (per unit) across the country in 2018 and 2019. In contrast, there were about 800 and 300 condominium units transferred to Russian and US citizens, the second and third largest foreign investors respectively. More than half of Chinese investors are based in mainland China. Thus, there was a 38.1 percent drop in condo transfers to Chinese citizens during the first quarter of 2022, a time when major cities in China like Xi’an Y Tianjin went into lockdown. In that same period, perhaps reflecting the impacts of the war in Ukraine, there was a 100 percent increase in condominiums transferred to the Russians. Still, the number of units transferred to the Chinese in the first quarter of 2022 (949 units) remained significantly higher than that of the Russians (134 units).

Sadly, Thais can do little more than pray to their lucky stars that Xi Jinping will change his mind and soften China’s zero-COVID stance.

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