China Solutions

Unleashing the Thai Tide: How China's Reopening is Set to Boost Thailand's Economy

March 24, 2024

“How many of you have been to Thailand recently?” asked Mr. Winston Lee, Director of Special Projects at PropertyGuru. 

His opening question was met with a flurry of raised hands in the audience on the first day of the two-day Southeast Asia Property Investment Show (SEAPIS) organised by PropertyGuru on March 25, 2023.

It was a fitting precursor to his sharing on the long-awaited reopening of China’s borders and its expected impact on the Thai economy.

After a three-year lull, China’s reopening –and the subsequent influx of tourists into the region – seems to be a harbinger of good news for the revival of Southeast Asia’s tourism sector. Prior to the pandemic, Chinese tourists accounted for 22 per cent of all visitors to the region, with Thailand making up the largest share of these visits.

And the hunt for white sand beaches, night markets and mango sticky rice is back on this year. China’s revenge travel phenomenon is forecasted to boost the tourism-reliant Thai economy: 66 per cent of the country’s tourism revenue is attributed to foreign visitors, with 75 per cent of it coming from short-haul trips, particularly from Chinese tourists. The Thailand Tourism Authority is also expecting an increase in the number of Chinese tourists from 5 to at least 7 to 8 million.

In Mr. Lee’s words, “The Thai GDP is poised for growth with China’s reopening.”

Three Waves of Change

But a surge in tourism is not the only positive development that Thailand will experience – it is also set for an increase in trade and foreign direct investments.

On the trade front, China has been one of Thailand’s largest trade partners for nine consecutive years, making up almost 18 per cent of the country’s total trade. Their long-standing relationship is likely to continue, with Thailand recently upgrading the Free Trade Agreement (FTA) between China and ASEAN and expanding other mini FTAs with Chinese cities and provinces.

Similarly, Thailand’s geostrategic position in the ASEAN free trade bloc has consistently attracted investments from China, even during the pandemic. In fact, in 2021, Chinese investments rose in Thailand’s key industries, including sectors like electric vehicles, clean energy and electronics. Last year, China topped the charts for direct investment applications in Thailand.

Taken together, these developments will create positive ripple effects in the economy in 2023 and beyond.

The Future of Thai Real Estate

“Property Is always correlated with the economy,” Mr. Lee said at the event held at the Sands Expo and Convention Centre, which brought together real estate experts, metaverse innovators and investors.

Indeed, Chinese spending in Thailand is not limited to the travel and hospitality industries – they are also buying properties. Even before China’s full reopening, in Q1 to Q3 2022, Chinese buyers have already purchased an estimated US$511 million worth of condominium units in Thailand, accounting for 49 per cent of foreign purchases.

“From an investment point of view, it is a good idea to position yourself in this market before the full resumption of flights between China and Thailand,” he continued, adding that China’s reopening will bring about an upside in property value.

This is not just the case for residential real estate either. With hotel occupancy rates soaring and predicted to rise to 70 per cent this year, hospitality real estate presents favourable opportunities as well.

The outlook looks promising, so much so that the event has drawn investors from halfway across the world. Tim and Amber, a couple from Canada in their late 30s, revealed that they had specially stopped by to attend SEAPIS during their road trip in Southeast Asia. Having recently invested in vacation homes in Chiang Mai, they were interested in to find out how best to diversify their portfolios.

“Fewer people from North America come here,” Tim said. “We came from far away because there seems to be more investment opportunities in the region, and the returns could be bigger.” Besides other cities in Thailand, he and his wife are also considering investing in Malaysia, which they see as “well-connected” to the rest of the region.

Their sentiments are no doubt a positive indicator of not just Thailand’s but the region’s economic recovery.

“Tourism-led recovery will revitalise and reenergise the Thai economy,” Mr. Lee concluded. “And that’s where we see an upside, not just for one year, but for the next two to three years, when more and more (Chinese tourists) come to Thailand.”

 

Note: Article content was written based on the speaker’s insights from Southeast Asia Property Investment Show (SEAPIS) event which was held on 25-26 March 2023.

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