Thailand Law Journal 2010 Spring Issue 1 Volume 13

(1979 - 2003); Chinese Embassy in Thailand (2003); BOT (FDI inflow 1987 - 2003); BOI (1987-2005); Thai Ministry of Commerce (1997 - 2003); Chinese- Thai Enterprise Association (2003).

The first stage is between 1978 and 1991. Thailand andChina had diplomatic ties and made an agreement of economici cooperations in trade and investment, other Chinese started to make an investment for seeking experience in Thailand, In 1985, the governments of Thailand and China signed an agreement on the establishment of Chinese-Thai Joint Economic Cooperation Committee and an agreement on mutual investment protection, pervading improved conditions for investment cooperation (MOFCOM, 2005). During the first stage, this comprised the initial period after opening the Chinese economy when the Chinese political rationale towards outward FDI could be characterized as "selective acceptance." Still, oversea investment was proposed as one among many policy measures for economical reforms (Kvisgaard, 2005, pp. 26 - 27). As Zhao Gufu states in an interview, "The investments were extremely selective and limited in scope and only some of the biggest trading companies were allowed abroad." No data on Chinese investments in Thailand are available for this period until an agreement on mutual protection of investment with China was signed in 1985.

The political rational for the future Chinese economy had been cleared and the decision for pursuing a Chinese market economy had been made and the stance towards FDI can be described as "inclusive allowance." Thailand in this period is disregarded, the statistics are dominated by the inflow of investment in agriculture products, and towards the end of the period there is an interesting upsurge of investments in low-tech light industry. And. BOI approved 41 projects valued at 5,993.5 million baht (BOI, 2006). The BOT data confirms the expected entry of the construction companies and trading companies and confirms the general trend (BOT, 2003). These are normally precursors for actual industrial investment.
The second stage is between 1992 and 1997. It began with Deng Xiaoping's "Southern tour" in 1992 to push the economic development in China. As a result, a number of Chinese companies initiated their investment in Thailand. When outward investment had been accepted as a term of development, Jiang Zemin then publicly endorsed that companies could go abroad, in 1992 and 1997. During the period, approval procedures for outward investment were gradually decentralized which eased the outward expansion. This endorsement was related to investments in Thailand, the amount of the approved projects rpse and their character moved towards heavy industries sectors such as steel production, while agricultural products and chemical investments still played a role. And BOI approved 29 projects valued at 55,151.4 million baht The period also witnessed the first major investment in consumer electronics, which was a reflection of the saturation of mid-tech industries in China. Concurrently the dataset registered more inflow of trade related to investment in the period.

The third stage lasts from 1998 until the present time. The Chinese government has supported "Go-Out Strategy." The Asian Financial Crisis 1997 hit Thailand particularly hard. This fact was naturally reflected in the Chinese investment with inflow at its lowest level ever. The few investment projects registered during this period were very small value wise. The BOT surprisingly captured investments in real estate and construction investment at the end of 1999, which indicated that investors possibly are gaining more confidence in the property market and that the worst effects of the crisis might have been subdued. From 2000, Mr. Zhu Rongji explicitly called for companies to go abroad and that the government should implement a coordinated strategy for such investment. This should also be seen in connection with China's entry in the WTO in November 2001. From 1998 to 2005. BOI approved 90 projects with the value of 20,357.7 million baht.

From a Thai perspective, the result of this encouragement was very visible. In 2000 the relative amount of investment doubled and there was a general upsurge in trade and textiles industry. 2001 was the year when the Chinese investment pattern in Thailand really changed. China Worldbest Group made a stunning US$ 175 million, wholly owned investment in chemicals and textiles, mainly for export. Sinochem made a full equity stake of US$ 1.4 million investment in an antioxidant plant.

China's FDI in Thailand includes textiles, light industrial goods, rubber, chemical, potash mining, food processing, non-ferrous metal smelting, and banking, insurance, commodity inspection, hotels, restaurants and real estate. And Chinese invetors pay attention to engineering projects, contracting and labour service cooperation. Some of these projects are infrastructure construction, water conservation, roads, bridges, ports, chemical plants, textile mills, hospitals and residential housing (PRC Embassy in Thailand, 2004).

In the meantime, there have been bilateral cooperations and multilateral cooperations between Thailand and China in the Greater Mekong Sub-region (GMS) and China-ASEAN FTA's Framework. Through a period segmentation, it is possible to test whether these changes of policy are reflected in the Thai statistical data and to register the relative point of entry to certain sectors for a subsequent evaluation of politically related changes in investment motives.

2.3 Chinese Investment Projects
The Chinese company investment in Thailand (1987 - 2005): The Chinese companies' interests is investment cover 52 projects in agricultural products, 32 projects in chemicals and paper, 24 projects in light industries & textiles, 19 projects in metal products & machinery, 17 projects in electric and electronic products, 12 projects in minerals & ceramics, and 5 projects in services, with the high percentage of China's capital outflows in the chemicals and paper sector (23.71 per cent) value of 7,427 million baht and light industries & textiles sector (21.30 per cent) value of 6,713.5 million baht, 5,105.9 million baht in agricultural products, 3,868.9 bant in metal products and machinery, 3,240.2 million baht in minerals & ceramics, 3,120.3 million baht in services and 1,984.9 million baht in electric and electronic products, respectively (Table 2).

Table 2 PRC's Approved Investment Projects, 1987 - 2005



Cumulative Value
(Millions Baht)



Agricultural Products




Minerals & Ceramics




Light Industries & Textiles




Metal Products & Machinery




Electricand Electronic Products




Chemicals and Paper












Source: BOI, 2006.

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