The influence of China’s foreign direct investment on the economic development of Thailand

Last modified: October 26, 2019
Estimated reading time: 2 min
Project Title: The influence of China’s foreign direct investment on the economic development of Thailand
Author: Ms. Ma Nina
Advisor: Dr.Chai Thanichanun
Degree: Master of Business Administration
Major: International Master of Business Administration
Faculty: Graduate Schools
Academic year: 2017

Citation

Ma, Nina. (2017). The influence of China’s foreign direct investment on the economic development of Thailand. (Independent study, Master of Business Administration). Bangkok: Siam University.


Abstract

In the process of economic globalization, attracting foreign capital has been regarded as an important factor affecting economic development. Foreign direct investment (abb. FDI), which plays a direct role in promoting the economic growth of developing countries, is extremely important. Since the formal establishment of diplomatic relations between China and Thailand in 1975, the international direct investment and trade between the two countries have made rapid progress.

Starting with the relevant theories of international trade, this paper analyzes the current situation of China’s investment in Thailand. It is found that since the 2007 international financial crisis, the industries of direct investment to Thailand mainly concentrated in metal products, machinery and service industries, especially in metal products and machinery, which developed rapidly in the past years. In the 2008-2014 years, Chinese enterprises invested more in the mechanical and electronic products in terms of both quantity and capital value, followed by agricultural products. The number and amount of Chinese enterprises investing in Thailand are increasing. At present, most Chinese enterprises investing in Thailand mainly invest in small and medium-sized enterprises.

Based on the theory of economic growth, this paper sets up a model. Using the data of the direct investment from China to Thailand from 2003-2014 years, the Granger causality test proves that China FDI has promoted the growth of Thailand GDP.

In view of the related theoretical analysis and empirical test, for the long-term economic development of Thailand, the Thailand government should make efforts in the following aspects: actively promote preferential policies. The government of Thailand should actively introduce some more preferential policies or eliminate some unfavorable polices that may bring negative effect to Chinese enterprises, such as simplifying the examination and approval procedure, shortening the time of examination and approval, and actively reducing the tax, so as to attract more Chinese enterprises to invest more in the industry in Thailand.

On the basis of continuous economic development, Thailand should further increase the economic openness of the country, reduce the business operation cost of foreign enterprises in Thailand, improve the establishment of some system of attracting foreign investment system, enhance its competitiveness in the main investment countries of ASEAN, and use foreign capital to better serve the economic development of the country, and promote the upgrading of domestic technology and the transformation of industrial structure. Pay attention to the adjustment of industrial structure. While emphasizing the development of industry, Thailand must also see the importance of the third industry and make the industry develop in a balanced way. The government of Thailand should enrich and diversify the fields and industries that attract foreign investment, and guide the direction of foreign direct investment through policies and regulations, for example, increase the threshold of heavy mechanical and metallurgical industries that waste too much natural resources and easy to cause pollution, and provide policy support to other industries like social services, education, research and development and so on. Thailand should promote the development of the second industry and the third industry, diversify and optimize the production structure and create a healthy industrial production chain.

 

Keywords:  Foreign direct investment, Economic growth, Theoretical analysis, Empirical analysis.


The influence of China’s foreign direct investment on the economic development of Thailand

International Master in Business Administration (IMBA), Siam University, Bangkok, Thailand

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