Bangkok, The Federation of Thai Industries is concerned about Thailand's trade deficit with China after the first half of the year saw a deficit of 15.66%, fearing that the TEMU app will cause a spike in Thai SMEs closing down. Mr. Phayon Srivanich, Chairman of the Thai Bankers Association, as Chairman of the Joint Standing Committee on Commerce, Industry, and Banking (JSCCIB), Mr. Kriangkrai Thienukul, Chairman of the Federation of Thai Industries (FTI), and Mr. Surong Bulakul, Vice Chairman of the Thai Chamber of Commerce, jointly announced the results of the Joint Standing Committee on Commerce, Industry, and Banking (JSCCIB) meeting for August 2024. Mr. Phayon revealed that the FTI is concerned about the trade deficit between Thailand and China. The latest is that in the first 6 months of 2024, imports from China increased by 7.12% YoY, worth over 37,569.89 million US dollars. This resulted in Thailand having a trade deficit with China of 19,967.46 million US dollars, an increase of 15.66% from the sam e period last year, which affected the manufacturing sector in more than 23 industries. In addition, it was exacerbated by the e-commerce platform that entered the domestic market by selling products from factories directly to consumers at low prices, which is a new form of trade in China. This puts even more pressure on SMEs because they cannot compete in terms of both price and higher production costs, resulting in the closure of Thai industrial entrepreneurs. Therefore, in order for Thai entrepreneurs to compete under the global megatrend of substandard products entering the market due to oversupply, the FTI meeting proposed that the government strictly inspect import standards, supervise and control products that avoid taxes, and strictly enforce laws related to domestic trade. This is done by creating an ecosystem that makes Thai entrepreneurs and the Thai supply chain strong and sustainable. The Board of Trade of Thailand, the Thai-Chinese Chamber of Commerce And the Embassy of the People's Republic of China in Thailand has established the Thai-Chinese Center for Business Sustainability (TCCBS) to resolve trade and investment issues between Thailand and China within the framework of mutual benefits under the laws of both countries and international rules. Mr. Kriangkrai Thienukul, Chairman of the Federation of Thai Industries (FTI), said that the TEMU app is expected to directly and severely impact the Thai industrial sector, as it is a way to send products from Chinese factories to sell all over the world, including Thailand, without the need for middlemen, which have very low production costs. In just over a year since the TEMU app entered the American market, it has caused a huge impact on the market leader, Amazon, and there are 51 million consumers using the service per day, causing sales to skyrocket. Therefore, this app will cause Thai industrial products to be severely affected by the influx of products from China, and this app will make things worse. Previously, to buy products from TEMU's parent company, they had to work together to negotiate for a large volume, but now they don't have to. You can buy just one piece and get the factory price. This is a problem that we are keeping an eye on. The FTI would like the government to find measures to block it, including implementing strict tax measures. Mr. Phayon continued that the second half of the year is a challenge for Thai exports because the global economy is still slowing down. China's domestic purchasing power is also slowing down. The United States is facing a weakening labor market that will put pressure on consumption in the future. Meanwhile, the global financial market is volatile. The Fed has signaled a faster and stronger interest rate cut, contrary to the Bank of Japan, which has increased interest rates, causing the baht to appreciate rapidly. The market share of Thai industrial products in ASEAN decreased, with the electrical appliance group decreasing from 12.7% (1Q/66) to 11.5% (1Q/67) and the automotive group decreasing from 20.9% ( 1Q/66) to 18.7% (1Q/67), as a result of China increasing its exports to compete in the ASEAN market, which was one factor causing industrial production in the first 6 months of the year to contract by 1.8%. In addition, there is an additional risk from Chinese products penetrating the e-commerce market. The Thai economy in the future is still fragile even though the government budget disbursement has started to bring more money into the economic system. The acceleration of budget disbursement has caused government spending to expand by an average of more than 15% in May-June. However, domestic demand has slowed down as reflected by the real estate transfer amount in 5M/67 contracting by -8.8%, the car sales amount in 6M/67 contracting by -24% YoY, and the exports that have not expanded much, causing the Thai economy to tend to expand below its potential even though the tourism sector is gradually recovering. The NESDB therefore maintains the economic forecast framework for 2024 (as of August 2024) at 2.2 - 2.7, exports at 0.8 - 1.5, and inflation at 0.5 - 1.0. However, even though the number of factory openings in the first 6 months of 2024 has continued to expand, with more than 1,009 factories opening, an increase of 122.67% YoY, most of which are foreign investors who invested through the BOI, at the same time, it was found that there were more than 667 factories closing in the first half of the year, an increase of 86.31% YoY from the previous year, or an average of 111 factories/month. And if we consider the value of each factory that closed, it was found that the capital decreased to an average of 27.12 million baht per factory, which reflects that most of them are small factories or SMEs that are closing factories at an accelerated rate. The FTI has prepared proposals to promote the industry, such as promoting products made domestically (Made in Thailand) to help allocate money into the system by sector, supporting the automotive parts industry to support EVs and transform into new businesses, promotin g SMEs, managing waste in the industrial sector, and developing manpower to support Industry 4.0. The government has observed that the Thai economy has low investment, with the investment ratio to GDP being less than 25%, down from almost 30%, while there is a high level of savings from the continuous current account surplus and more capital outflows to invest abroad, which is a missed opportunity to invest in restructuring production and upgrading production efficiency within the country. The FTI meeting agreed with the government that Thailand needs to invest to increase its competitiveness with neighboring countries. It proposed that the government have tangible tax support measures to promote investment in secondary cities and support investment using domestic raw materials (local content), promote investment in research and development in modern industries, invest in infrastructure to support megatrends, invest to support a low-carbon society, and improve criteria and laws to reduce obstacles to doing b usiness (Ease of doing business) and readiness in human resources. The household debt situation is still concerning. The NPL figures reported by the credit bureaus have continued to increase. The latest figure in May was 1.14 trillion baht, an increase of 11% YoY, reflecting the recovery of income that has not yet reached all. The FTI meeting saw the need for the government to accelerate the transfer of money into the economic system, with a focus on upgrading the grassroots and manufacturing sectors in the Real Sector to be competitive and generate income for businesses and workers throughout the supply chain. This is coupled with encouraging debtors and the business sector to participate in debt restructuring or debt consolidation to reduce debt burdens in line with income. The FTCC meeting saw that expediting budget disbursements for the remaining period of the year was an urgent necessity, especially to stimulate government construction activities to return, which would help support related economic sec tors, including employment, to recover quickly and increase liquidity in the system to support weak purchasing power. In addition, it was proposed that the government should use technology such as Block Chain to develop online procurement processes according to the Procurement Act B.E. 2560 to be efficient, transparent, and able to track status at all times. Source: Thai News Agency