China Eyes Thailand for Factory Expansion

Thailand’s recent leap in ranking for the Ease of Doing Business index has caught China’s attention. 

The EODB index is scored by the World Bank and is composed of six factors of equal weighting: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.

Although Thailand has jumped up 6 ranks globally it would still be in 6th place between Taiwan and Japan even if it had last year’s score of 27. Nonetheless it demonstrates that the government’s efforts to streamline company formations and cut back on the red tape for business operations is paying off.

The two ranking factors that did the heavy lifting for Thailand are dealing with construction permits and protecting minority investors. According to the Bangkok Post, six of the remaining eleven factors haven’t changed since last year.

These improvements are making Thailand an attractive location for China’s overseas industrial expansion. Due to the punishing hikes to US tariffs, China seeks to produce and export its goods in the guise of other countries. Chinese Board of Investment applications have doubled year-on-year, claims a report from the BOI. Most of the applications are coming from businesses involved in rubber and tyre manufacturing.

An influx of Chinese products from domestic manufacturing and the Belt and Road project could have mixed results for Thailand’s economy. For the consumer, the increased competition and supply would drive down the price of consumer goods. For the local business owner, however, this could spell bad news if the Chinese can profitably undercut them and drive them out of business.

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