A Free Trade Agreement (FTA) is a contract between two or more nations that eliminates trade restrictions and facilitates trade. The FTA creates a more open and competitive global market. It does so by allowing goods to be purchased and sold across international borders. Moreover, FTAs reduces or eliminates government tariffs, quotas, or subsidies. If you are a Chinese Investor, such FTAs can help you setup your company in Thailand.
Thailand has signed 15 free trade agreements (FTAs). 14 of these are already in effect, and 14 other FTAs are under process of consideration. Additionally, nine more FTAs are currently in discussion, according to the Asia Regional Integration Center (ARIC).
Additionally, Thailand has agreements in place for bilateral commerce with China.
Association of Southeast Asian Nations (ASEAN)
Thailand is a part of the ASEAN organization, which was founded in 1967. Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam are among the ten nations that make up ASEAN.
With its economic partners, ASEAN has enacted a number of free trade agreements. This involves nations including Australia and New Zealand, China, India, Japan, and South Korea. Additionally, in November 2020, 10 ASEAN nations and its six trading partners entered a free trade agreement. Australia, China, India, Korea, Japan, and New Zealand are these nations to sign the Regional Comprehensive Economic Partnership (RCEP).
Free Trade Agreement between Thailand and China
The China-Thailand Free Trade Agreement (FTA) was ratified in October 2003, four months after it was signed in June 2003. A “farm trade early harvest deal” is what it is. Before the larger China-ASEAN FTA went into effect in 2010, both countries opened their agricultural markets. Additionally, and as part of the deal, tariffs on 188 different fruits and vegetables were immediately dropped to zero.
NGOs, farmers’ organizations, academic institutions, and media in Thailand have exclusive documents supporting the detrimental effects of the China-Thailand FTA. For instance, Thai longan, garlic, and other fruit and vegetable growers have lost their livelihoods. This was the result of the low-cost Chinese imports, especially in the north. Despite government promises, only Thai cassava exports rose.
Thais have long condemned low-quality Chinese produce for having excessive levels of pesticide residue. As a result, the two nations have since developed a set of shared private food safety standards (the Thai-China GAP). Furthermore, this has further boosted corporate farming and increased concentration.
Overall, small farmers on both sides of the border have suffered because of the China-Thailand Free Trade Agreement. However, this has brought benefits for business owners who have control over the trade. Additionally, benefits are also for those who can use it to expand their contract farming operations. For instance, the Chinese-owned Charoen Pokphand Group in Thailand.
Past Statistics
Thailand is China’s third-largest trading partner in ASEAN, behind Malaysia and Singapore. Thailand is China’s fourteenth-largest trading partner globally. One of the nations to sign up for the EHP Part 2 was Thailand. Positions taken by Member Countries 4. Thailand 43 was first adopted prior to the 2004 signing of the ASEAN-China Agreement on Trade in Goods. Under the EHP, since January 2004 to January 2006, early tariff reductions on agricultural items were permitted.
Since the adoption of EHP in January 2006, Thailand has enjoyed a trade surplus on primary agricultural exports. However, it continues to have a trade deficit with China. Thailand’s top ten exports to China includes (in descending order)
- Rubber
- Chemical products
- Ethylene polymers
- Rubber products
- Tapioca products
- Electronic integrated circuits
- Refined fuels
- Wood and wood products
- Electrical equipment and parts, and,
- Wood.
There is a growth in Thai exports to China by 39 percent, or about US$17.42 billion. Note that, this is in the first ten months following the ASEAN-China Free Trade Agreement’s entry into force on January 1, 2010. Additionally, there is growth in imports by 46 percent, or about US$20 billion.
Going Global
China has risen to become the second-biggest economy and the world’s largest exporter as a result of significant FDI from abroad. The Chinese economy is facing a number of difficulties as it grows, including rising wages, environmental concerns, and anti-Made in China groups. As a result, China has chosen to follow a “Going Global” policy that promotes FDI from outside the country.
The ASEAN-China Foreign Ministers’ Connectivity Meeting took place in Kunming on January 25, 2010, to discuss ways that China and ASEAN may improve connectivity both inside and between their respective blocs of nations. ACFTA is a crucial part of the soft infrastructure that can support ASEAN-China economic ties and should be used in conjunction with the construction of extensive infrastructure.
Willingness of Thailand to establish more FTAs with China
The Thai government intends to negotiate mini-FTAs with other Chinese regions after signing the country’s first free trade agreement with the Hainan province in late August.
In addition to a trade display featuring top-tier Thai goods at the Hainan Expo, the ministry of commerce wants to organize online business matching activities between Thailand and Hainan by the end of 2021 with an emphasis on promoting health, wellness products and services for the second year in a row. According to him, Thai officials are eager to sign these agreements in order to increase bilateral trade with more Chinese provinces, such as the mostly Muslim Gansu in the north, which is a suitable fit for Thai halal products. This agreement can be a basis of setting up Chinese company in Thailand in the livestock or the food industry.
The Chinese government has declared Hainan a free trade port, linking it to other nations as part of the “Belt and Road” initiative to promote trade there, according to the Commerce Ministry. The “Maritime Silk Road,” which links Southeast Asia to the Greater Bay Area of Guangdong, Hong Kong, and Macau, passes via Hainan, the smallest province in southern China. (NNT)
One of the pillars of East Asia’s economic integration and community building may be cooperation between ASEAN (Thailand) and China. This willingness of both the nations to collaborate in trade relations can be a great opportunity for Chinese investors to setup company in Thailand.
Current Scenario
China stands ready to advance an all-round cooperation with Thailand and make it lead regional cooperation. Chinese State Councilor and Foreign Minister Wang Yi on April 02, 2022, interacted with Thai Deputy Prime Minister and Foreign Minister Don Pramudwinai. This was during visit of the Thai ministers in Tunxi in East China’s Anhui Province.
The Belt and Road Initiative, railroad, industrial parks, vaccines, and drug research and development should all see an increase in bilateral cooperation. Furthermore, China and Thailand can use the Regional Comprehensive Economic Partnership (RCEP) agreement. Focus of its implementation will be an opportunity to maximize their current level of economic and trade cooperation. Additionally, they are seeking to deepen their connections in the fields of new energy, digital economy, and electronic technology.
The RCEP, since January 1, includes China, Australia, Japan, New Zealand, South Korea, and the other nine ASEAN members, in addition to Thailand. This enables Chinese Investors to start their company in all these nations along with Thailand.
Wang urged the two nations to cooperate to write a new chapter in bilateral relations. He added that this year marks the 10th anniversary of the China-Thailand Comprehensive Strategic Cooperation Partnership.
Thailand is ready to work with the Chinese side to build the Belt and Road and participate in the Global Development Initiative. Additionally, there are plans to expand cooperation on agricultural products and inter-connectivity between Thailand and China. This is also to ensure the security of the industrial chain and supply chain.
Additionally, China and Thailand plans to advance the comprehensive strategic partnership between China and ASEAN and intensify practical Lancang-Mekong cooperation.
The Bottomline
Hopefully, this article is able to explain to you the ease for a Chinese Investor to set up their company in Thailand. Therefore, if you are from China, bootstrap to start your business in Thailand. However, although there are cushions according to the FTA, yet, you will still need legal support to do so. Feel free to communicate with us to start your Chinese venture in Thailand. Write to us at [email protected] for any and all type of assistance in corporate law in Thailand. Chinese Investors can now Setup Company in Thailand with more ease. Read this article to know about the enhanced China-Thai Trade Relations.
